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XXVI 

THE ARBITRAL DETERMINATION 
OF RAILWAY WAGES 



THE 

ARBITRAL DETERMINATION 

OF RAILWAY WAGES 

BY 

J. NOBLE STOCKETT, Jr., Ph.D. 




BOSTON AND NEW YORK 

HOUGHTON MIFFLIN COMPANY 

C3Tf>e fitoettfiDe $re#s £ambri&0e 

1918 






F 



COPYRIGHT, I918, BY HART, SCHAFFNER * MARX 
ALL RIGHTS RESERVED 

Published September iqiS 



/So 



OCT -2 1918 

©CI.A503644 



PREFACE 

This series of books owes its existence to the gen- 
erosity of Messrs. Hart, Schaffner & Marx, of Chicago, 
who have shown a special interest in trying to draw 
the attention of American youth to the study of eco- 
nomic and commercial subjects. For this purpose they 
have delegated to the undersigned committee the task 
of selecting or approving of topics, making announce- 
ments, and awarding prizes annually for those who 
wish to compete. 

For the year ending June 1, 1916, there were of- 
fered : — 

In Class A, which included any American without 
restriction, a first prize of $1000, and a second prize of 
$500. 

In Class B, which included any who were at the time 
undergraduates of an American college, a first prize 
of $300, and a second prize of $200. 

Any essay submitted. in Class B, if deemed of suf- 
ficient merit, could receive a prize in Class A. 

The present volume, submitted in Class A, was 
awarded second prize in that class. 

J. Laurence Laughlin, Chairman, 
University of Chicago. 
J. B. Clark, 

Columbia University. 
Henry C. Adams, 

University of Michigan. 
Edwin F. Gay, 

Harvard University. 
Theodore E. Burton, 

New York City. 



NOTE 

An obituary note must, sadly enough, take 
the place of the foreword which should have 
prefaced this essay. The author's life, rich in 
scientific promise, was snuffed out at the very 
threshold of a scholar's career., and this bril- 
liant essay remains as the melancholy exhibit 
of what larger things might hereafter have 
been achieved. 

J. Noble Stockett, Jr., was born in Balti- 
more, on February 27, 1889. He received his 
elementary education in the public schools of 
Baltimore, graduating from the Baltimore 
City College in 1907. He entered the Johns 
Hopkins University in 1907 receiving the 
degree of Bachelor of Arts in 1911. After 
teaching two years at the Kent School, Kent, 
Connecticut, he returned to the Johns Hop- 
kins University and pursued graduate studies 
in Political Economy for three years. He re- 
ceived the degree of Doctor of Philosophy in 
June, 1916, and immediately thereafter was 
appointed Instructor in Political Economy 
in Dartmouth College. He died at Hanover, 
New Hampshire, on September 28, 1916. 



CONTENTS 

Introduction . xi 

I. Standardization ....... 1 

II. The Living Wage 54 

III. The Increased Cost of Living ... 77 

IV. Increased Productive Efficiency . . 129 

V. Principles governing the Arbitral De- 
termination of Wages . . . .168 

Index 195 



INTRODUCTION 

Settlements of wage disputes by means of 
the accepted methods of maintaining indus- 
trial peace — mediation or conciliation, vol- 
untary and compulsory arbitration — have 
been effected in the past by appeal to ex- 
pediency and compromise, rather than by a 
consideration of the merits of the arguments 
presented by the two parties. The frequency 
of strikes and lockouts, the recurrence of 
disputes followed by applications for gov- 
ernment mediation or arbitration, and the 
general feeling of antagonism still existing be- 
tween employers and employees, give ample 
evidence that these peaceful methods do not 
reach the source of the trouble. Especially is 
this true in the case of wage disputes. In the 
past, the primary object of mediation and 
arbitration has been the maintenance of the 
processes of production in continuous opera- 
tion, and questions concerning wages have 
been approached and decisions rendered with 
this purpose in view. The desideratum has 
been a prompt, speedy settlement, and this 
has been attained at the sacrifice of a deter- 
mination based on the merits of the respective 
claims and on some principle of reasonable 



xii INTRODUCTION 

wage determination. The result has been a 
lessening, perhaps, in the number of strikes 
and lockouts and in the interruptions to pro- 
duction; but the underlying causes of wage 
disputes remain unaffected by mediation and 
arbitration decisions, and capable at any time 
of causing new disputes and of arousing still 
more unfriendly relations. 

It may be asked whether the failure of these 
methods of maintaining industrial peace to 
offer a clue to the solution of the wage prob- 
lem lies in any inherent fault in the methods 
themselves, or in the manner in which they 
are at present applied. From its very nature, 
mediation can never approach such a solu- 
tion. The mediator's function is to pla- 
cate the disputants, to harmonize the differ- 
ences between employer and the employee, 
and, by winning concessions from both sides 
through force of personality and tact, to 
effect an agreement acceptable to the parties 
concerned. 1 Compromise is inevitable. Medi- 
ation is not interested in the justice of the 
respective claims; the elements of fairness, 
reasonableness, and equity do not enter into 
the proceedings. 2 The employees endeavor to 
obtain as great a wage advance as possible; 
the employers, to concede as little as possi- 

1 Bulletin, U.S. Bureau of Labor, No. 98, p. 15. 

2 Ibid., p. 15. See also Eastern Conductors and Trainmen's Ar- 
bitration (1913), Proceedings, pp. 1973-1974. 



INTRODUCTION xiii 

ble; and the mediators, paring down here and 
adding on there, finally succeed in arranging 
a voluntary settlement. A mediation decision 
is merely an adjustment of the dispute, 
rather than a judgment on the merits of the 
case; the principles underlying the questions 
at issue are ignored, and adjudication of them 
postponed for the time being. 1 Arbitration, 
on the other hand, implies a weighing of the 
arguments of the respective sides by a board 
containing at least one impartial member, and 
an award representing a judgment upon the 
merits of the questions involved. The arbi- 
trator's function partakes of a judicial na- 
ture; the decision rendered must be based 
upon some definite, accepted principle of rea- 
son governing the disputed question. There 
is nothing, therefore, in the method of arbi- 
tration to prevent the attainment of a perma- 
nent solution of the wage problem — a solu- 
tion, in that the underlying causes of the 
wage dispute are met by the application of a 
reasonable principle of wages; and perma- 
nent, in that this principle of wages is al- 
ways applicable, although changing external 
conditions will necessitate some alteration in 
the terms of the original award. 

Arbitration, as at present practiced, has 

1 F. H. Dixon, "Public Regulation of Railway Wages," Proceed- 
ings of American Economic Association, 1914, Vol. xxvn, pp. 257- 
259. 



xiv INTRODUCTION 

little or no judicial character except in the 
form of the proceedings. Counsel for the dis- 
putants present briefs, witnesses are sworn 
and evidence introduced, the board adjourns 
to render a decision which is binding upon 
the parties; but here the parallel ceases. An 
arbitration award, like a mediation agree- 
ment, is almost without exception a compro- 
mise decision. Investigators, employers, em- 
ployees, and arbitrators themselves testify to 
this. The Eastern Engineers' Board (1912) 
reported that compromise was practically 
inevitable under the Erdman Act. 1 Presi- 
dent Garretson, speaking for the Conductors 
and Trainmen in their concerted movement of 
1913, stated that "every settlement that has 
ever been made by these organizations has 
been a compromise settlement." 2 In some 
cases in which the award purports to be based 
upon a certain principle of wage advance, 
there is a strong presumption, when a com- 
parison of the original demands of the em- 
ployees and of the increase granted is made, 
that after all the award is a simple compro- 
mise. 8 

1 Eastern Engineers' Arbitration (1912), Report of Board, pp. 
100-101. 

2 Eastern Conductors and Trainmen's Arbitration (1913), Pro- 
ceedings, p. 531. 

3 For example, the switchmen on roads entering Chicago re- 
quested a six-cent increase in 1910, aad received by the arbitra- 
tion award of March 22, 1910, under tbe Erdman Act, an advance 



INTRODUCTION xv 

There has been almost universal condem- 
nation of the practice in arbitration of split- 
ting the difference between the demands of 
the men and the concessions of the employ- 
ers. 1 Professor Adam Shortt, who has served 
as chairman on numerous boards of concilia- 
tion and investigation in Canada, refers to it 
as a "demoralizing principle," 2 and Judge 
William L. Chambers, United States Com- 
missioner of Mediation and Conciliation, when 
acting as chairman of the Eastern Firemen's 
Board in 1913, expressed the hope that the 

of three cents. The increase was based on the cost of living, which 
the board determined had advanced twenty-five per cent, an equiva- 
lent of an eight-cent increase in switchmen's wages (Records, U.S. 
Board of Mediation and Conciliation, File No. 25). Again, in the 
dispute of the telegraphers with the Missouri Pacific in 1910 the 
increased cost of living was also given as the basis of the increase. 
There is little doubt, however, that the award was a compromise, 
for in a letter to Judge M. A. Knapp, dated July 27, 1910, the chair- 
man stated that the men's representative had "... yielded finally 
to my persuasion for a considerable concession below the original 
demands of the employees ..." and that he was "... now en- 
deavoring to get Mr. Sullivan [the road's representative] to join 
in the award" (Records, U.S. Board of Mediation and Concilia- 
tion, File No. 33). In the Georgia and Florida Arbitration (1914), 
under the Newlands Act, the employees requested a twenty-two 
per cent increase and received a little over ten per cent. The in- 
crease was based on the desire of the board to standardize the rates 
on this road with those of other roads in the vicinity, the rates of 
which were found to be about fifteen per cent higher than those on 
the Georgia and Florida (Georgia and Florida Arbitration (1914), 
Report of Board, pp. 5, 6, 12). 

1 An important exception is Mr. M. A. Knapp, of the U.S. Board 
of Mediation and Conciliation, who stated, in an address before the 
National Association of Railway Commissioners, that compromise 
was the proper method in arbitration (Railway Age Gazette, Vol. xlv. 
No. 21, pp. 1193-1194). 

2 Labour Gazette (Canada), June, 1907, p. 1410. 



xvi INTRODUCTION 

award would not be a compromise, but in the 
nature of a judgment or decree of the court. 1 
The employees have registered their disap- 
proval of compromise decisions both in the 
course of arbitration proceedings 2 and in 
minority reports appended to the awards. 3 
Employers, too, have emphasized the neces- 
sity of basing wage decisions on some prin- 
ciple of reasonableness and fairness. 4 In 1913 
the railways in the Eastern District refused 
for a considerable period to arbitrate their 
dispute with the firemen under the provi- 
sions of the Erdman Act, partly on the ground 
that the award would of necessity be a com- 
promise, and thus work to their disadvantage. 6 
Their attitude was probably the same as that 
of a recent investigator who stated, ". . . It 
is not absolutely certain but that in excep- 
tional cases a strike or lockout is a more 
wholesome culmination of an aggravated dis- 
pute than a series of temporizing and un- 
satisfactory compromises." 6 

1 Eastern Firemen's Arbitration (1913), Proceedings, p. 2492. 

8 Ibid., Proceedings, p. 2375. 

8 Eastern Engineers' Arbitration (1912), Report of Board, p. 
Ill; Eastern Conductors and Trainmen's Arbitration (1913), Re- 
port of Board, p. 58. 

4 Ibid., Proceedings, p. 2056; Chicago and Western Indiana Rail- 
way and Belt Railway Co. Arbitration (1913), Proceedings, Vol. 
n, pp. 1341-1342. 

6 Eastern Firemen's Arbitration (1913), Supplementary Report 
of the International President, Concerted Movement (1913), p. 38. 

6 Victor S. Clark, "Canadian Industrial Disputes Investigation 
Act of 1907," Bulletin, U.S. Bureau of Labor, No. 86, p. 3. 



INTRODUCTION xvii 

The justification for these opinions be- 
comes apparent when the effects of decisions 
based on compromise are considered. In the 
first place, employees are encouraged to make 
frequent demands for wage increases, since 
they are practically certain that at least a 
part of their requests will be granted. The 
demands made, also, are generally far in ex- 
cess of what can be supported on reasonable 
grounds; and naturally so, because the em- 
ployees, knowing in advance that their re- 
quests will be cut in half, make their demands 
double the amount which they really expect 
to receive. 1 The employers, on the other 
hand, knowing the usual outcome of disputes 
submitted to arbitration, generally agree to 
arbitrate only as a last resort, and then are 
determined to concede the minimum amounts 
although they may be convinced of the jus- 
tice of the employees' claim to a certain in- 
crease in wages. The frequency and extrav- 
agance of the employees' demands serve to 
increase the danger of an open breach in the 
relations of the two parties with consequent 
interruption to the processes of production 
and injury to the public. Compromise deci- 
sions also render the expenditures of both 
sides, for the collection of data and the pay- 

1 Eastern Engineers' Arbitration (1912), Report of Board, p. 
101; Eastern Conductors and Trainmen's Arbitration (1913), Pro- 
ceedings, p. 2056; Bulletin, U.S. Bureau of Labor, No. 98, p. 176. 



xviii INTRODUCTION 

ment of statistical experts for the prepara- 
tion of exhibits illustrating the principles 
underlying their agreements, a useless extrav- 
agance and waste. If the arbitrator in order 
to reach a decision has simply to divide the 
difference between the maximum demands of 
the men and the minimum concessions of the 
employer by two, he will scarcely need thou- 
sands of pages of statistical tables, diagrams, 
and evidence of witnesses showing the rise in 
the cost of living, the increase in productive 
efficiency, and the effect of various mechanical 
appliances. 

The most serious count against a compro- 
mise award, however, is its unjust character. 
It is not based upon any adequate investiga- 
tion of the facts nor upon any inquiry into the 
relative merits of the arguments presented 
by the two sides in support of their claims. 
No attempt is made to determine whether 
the employees are justified in requesting an 
increase or the employers in refusing to agree 
to an advance in wages. Such a decision 
effects no real settlement, for if a reason for 
a certain increase in wages existed in the 
first instance, the same reason exists after a 
part of the proper increase has been granted. 1 
The adjustment settles nothing definitely; it 

1 Eastern Conductors and Trainmen's Arbitration (1913), Pro- 
ceedings, p. 531. 



INTRODUCTION xix 

merely postpones further action on the prin- 
ciple involved until after the expiration of the 
time limit set in the award. Both employers 
and employees feel that they have been un- 
justly dealt with, and return to work, hostile 
to each other and disinclined to refer further 
disputes to peaceful settlement. The piling- 
up of compromise on compromise results 
in a haphazard, unscientific wage system un- 
satisfactory to all concerned; for the em- 
ployer is paying a certain wage without any 
knowledge of why he is paying that amount 
except that he is obliged to, and the employee 
is receiving his wage, although certain that he 
is worth more, but unable to force a larger 
amount from his employer. 

In the preceding paragraphs an attempt 
has been made to show that the possibilities 
of arbitration have not been realized on ac- 
count of the use of the principle of compromise 
in arriving at wage awards; that this prin- 
ciple is almost universally condemned; and 
that this condemnation is justified by a con- 
sideration of the evil effects of compromises 
in arbitration proceedings. If this attempt 
has been successful, it is evident that the 
method of adjustment by compromise must 
be abandoned, either by some organic change 
in arbitration laws or by some alteration in 
the method of their application. 



xx INTRODUCTION 

The seeming inevitableness of compromise 
decisions has been ascribed to various causes 
— the short period of time within which the 
arbitrators must render a decision, the heavy 
responsibility placed upon the single neutral 
arbitrator, the ignorance of the impartial 
member of the board concerning the details 
of the industry involved, and so on. The 
fault lies, however, not so much with the 
specific details of the various laws, as with 
the lack of some definite, fundamental prin- 
ciples to which arbitrators may turn as bases 
for their wage decisions. The first question 
which arises in an arbitrator's mind is: What 
is the fair wage for this particular kind of 
work, or what are the just and reasonable 
grounds for an increase in the wages of this 
class of employees? If there existed some 
generally accepted principle of a fair and 
reasonable wage and some definite basis of 
wage advance, the task of the arbitrator 
would be much lightened, for he would be 
able to apply these general principles to the 
particular facts in the dispute and arrive at 
an equitable decision. This urgent need has 
undoubtedly been brought home to every 
one who has had any experience in arbitra- 
tion proceedings. The writer of a recent arti- 
cle on the Australian industrial courts stated 
that one could not help being impressed with 



INTRODUCTION xxi 

the bewildered search of the courts for guid- 
ing principles. 1 The statement of the Eastern 
Engineers' Board (1912) is fairly typical of 
the conclusions reached by all wage boards: 
"Possibly there should be some theoretical 
relation, for a given branch of industry, be- 
tween the amount of the income that should 
go to labor and the amount that should go to 
capital; and if this question were decided, a 
scale of wages might be devised, for the dif- 
ferent classes of employees, which would de- 
termine the amount rightly absorbed by la- 
bor. It may be that in the future some such 
solution will be worked out for the various 
industries; and if so, the income of the rail- 
roads could be so apportioned. Thus far, how- 
ever, political economy is unable to furnish 
such a principle as suggested. There is no 
generally accepted theory of the division of 
income between capital and labor." 2 

It is true that the study of economics has 
not resulted in an accepted solution of the 
wage problem; some economists have gone 
so far as to state that the determination of 
a fair and equitable wage is an impossibility. 
One who has had wide experience in the set- 
tlement of railway disputes in the United 

1 G. A. Beeby, " Artificial Regulation of Wages in Australia," 
Economic Journal, Vol. xxv. No. 99, p. 323. 

2 Eastern Engineers' Arbitration (1912), Report of Board, p. 
47. 



xxii INTRODUCTION 

States is authority for the assertion that 
there is no right or wrong about wages. 1 In 
an address before the American Economic 
Association, Dr. F. H. Dixon said: "As a 
matter of fact the situation is hopeless, and 
will remain so, as long as we delude ourselves 
into thinking that we can under present eco- 
nomic conditions find a basis for wages in any 
theory of ultimate reasonableness. It may 
be that we are not merely chasing a will-of- 
the-wisp when we are hunting for a reason- 
able wage, but we are at any rate seeking the 
unattainable." 2 

The situation may be hopeless, but arbi- 
tration, without the application of some gen- 
erally accepted principle of wages in the 
awards, will continue to be a mere com- 
promise method, accompanied by manifold 
evils and incapable of effecting an equitable 
settlement of any wage dispute. If it be 
agreed that the determination of principles 
of fair wages and of wage advance will aid 
in securing better results in arbitration pro- 
cedure, search for a principle of fair and rea- 
sonable wages may not be abandoned. Final 
solution of the wages problem may never be 
reached; but continuous and energetic effort 
must be directed toward a nearer approach 

1 Railway Age Gazette, Vol. xlv, No. 21, pp. 1193-1194. 

2 Proceedings of the American Economic Association, 1914, Vol. 
xxvn, pp. 264-265. 



INTRODUCTION xxiii 

to a reasonable and just division between em- 
ployer and employee. 

It is the purpose of the following chapters 
to present a study of the principles of wage 
determination and of wage increase advanced 
by the employees and employers in the course 
of arbitration proceedings. The contentions 
of these two parties are likely to show ex- 
treme bias, but it is to be expected that their 
arguments, tempered by the findings and 
reasoning of arbitration boards, will suggest 
some fundamental principles which may serve 
as the basis of a fair and reasonable wage or of 
a just principle of wage increase. There is 
no richer field for such a study than the dis- 
putes settled by arbitration under the Erd- 
man x and Newlands 2 Acts in the United 
States and by the boards of conciliation and 
investigation appointed under the Canadian 
Industrial Disputes Investigation Act. 3 Since 
the first-named laws apply only to railways, 
all those disputes involving other industries 
which have been settled under the Canadian 
statute have been omitted in this study. 

Thirteen arbitrations have been conducted 
under the provisions of the Erdman Act dur- 

1 U.S. Statutes at Large, Vol. xxx, pp. 424-428. 

8 Ibid., Vol. xxxviii, Part I, pp. 103-108. 

* 6-7 Edward VII, c. 20. For text and amendments see Eighth 
Report, Registrar of Boards of Conciliation and Investigation 
(Canada), 1915, pp. 321-354. 



xxiv INTRODUCTION 

ing the fifteen years in which it was in force; 
seven under the Newlands Act up to June 30, 
1914; and forty-five railway disputes in- 
volving wages under the Industrial Disputes 
Investigation Act from March, 1907 to June, 
1915. In addition to these sixty-five cases, 
two others, the Eastern Engineers' Arbitra- 
tion of 1912 conducted by special agreement 
between the employees and the railways, and 
the Western Engineers and Firemen's Arbi- 
tration of 1915, were included in the material 
used. The briefs, exhibits, and evidence of 
witnesses of the employees and employers, 
so far as such material was available, have 
been examined with a view to ascertaining the 
content of each principle advanced and the 
grounds upon which it is supported. The 
findings of the arbitration boards are then 
discussed, and an appraisal made of the opin- 
ions of the parties to the controversy in the 
hope of forming a judgment as to the rea- 
sonableness and fairness of the proposed 
principles of wages. 

In these arbitration proceedings, four 
broad, general principles have been advanced 
as bases for wage determination — Stand- 
ardization, the Living Wage, Increased Cost 
of Living, and Increased Productive Effi- 
ciency. These constitute the subjects of four 
chapters. The final chapter attempts to clear 



INTRODUCTION xxv 

up inconsistencies and to merge the conclu- 
sions of the preceding chapters into a homo- 
geneous system. Of necessity, the result of 
such an attempt must be fragmentary and 
inconclusive; but the justification for the 
endeavor lies in the manifest need of some 
fundamental principles of wages which may 
be applied in arbitration proceedings. 



THE ARBITRAL DETERMINATION 
OF RAILWAY WAGES 

CHAPTER I 

STANDARDIZATION 

* The standardization of railway wages — 
the uniform application of a standard rate of 
pay for a given grade of employment within 
a certain area — has been the principle most 
stubbornly maintained by the railway em- 
ployees and the one which has been most in- 
fluential in determining the present form of 
railway wage bargaining. The object of the 
standardization movement is to secure uni- 
formity of compensation for similar service 
throughout a given area. This principle, 
therefore, is most conveniently treated under 
three headings according to the area in which 
the standard rate is to apply. The following 
sections deal successively with (I) System 
Standardization, (II) District Standardiza- 
tion, and (III) National Standardization. 

I. System Standardization 
System standardization implies the applica- 
tion of a standard rate to a single road or to 
a number of roads combined into one system. 



2 DETERMINATION OF RAILWAY WAGES 

The advocacy of the principle of system 
standardization grew out of the desire of the 
employees to abolish individual bargaining. 
Under this method, railway officials paid ap- 
plicants for positions according to their esti- 
mate of the labor and skill involved in operat- 
ing a train upon a certain run or division. 
Thus, employees received one rate for main 
line service, another for branch line, another 
for a run through particularly hilly country, 
and still another for a route upon which traf- 
fic was especially heavy. In course of time a 
wage system was built up consisting of a mul- 
titude of diverse rates. This condition the 
employees regarded as intolerable, for the 
reason that men of a certain grade of em- 
ployment and in the same service found them- 
selves in many cases receiving rates far be- 
low those obtained by fellow workmen of the 
same grade and in the same service who 
chanced to be working on a different run or 
division. Out of this grew the demand for a 
standard rate for a given grade of employ- 
ment in a certain service. This insures that an 
employee will receive as much for his effort 
and skill as any other workman of the same 
grade performing similar service, whether the 
work be done in the same locality or on an- 
other part of the road or system. Under sys- 
tem standardization, the multiplicity of rates 



STANDARDIZATION 3 

resulting from individual bargaining is abol- 
ished, and all employees who formerly were 
paid lower rates of pay receive at least the 
amount set as the standard. 

The standard rate so set applies uniformly 
to all employees of a given grade in the same 
class of service, regardless of varying physical 
and traffic conditions on different parts of the 
same road. Thus no difference is to be made in 
the rate of compensation between main- and 
branch-line service, or between service on a 
single-track division with numerous curves 
and grade changes and a run on a level, four- 
track route. The employees claim that class- 
ification of runs on the basis of varying traffic 
and physical conditions does not take ac- 
count in full degree of differences in efficiency 
required, and in the labor and responsibility 
involved in the various classes of service. The 
standardization requested by the employees 
by no means implies a single rate for all kinds 
of service; provision is made for the classi- 
fication of service and the establishment of a 
separate rate for each, and also, in the case of 
certain grades of employment, for a sub-classi- 
fication of service according to some criterion 
which will insure greater pay where greater 
labor and responsibility are involved. 
(The form of standardization proposed by 
the employees is well illustrated by the re- 



4 DETERMINATION OF RAILWAY WAGES 

quests submitted in the Eastern Engineers' 
Arbitration of 1912. Railroad service was clas- 
sified into passenger, through freight, — in- 
cluding mine, work, wreck, pusher or helper, 
milk, roustabout, and circus service, — local 
freight, switching, and belt line. Instead of five 
rates for these services, sub-classification re- 
sulted in a total of twelve rates. For instance, 
in through freight service, engineers operat- 
ing locomotives with a cylinder diameter of 
twenty inches or less were to receive $5.%5 per 
one hundred miles or less, ten hours or less; 
from twenty to twenty-four inches or over, 
excepting Mallets, $5.75; and Mallet type of 
engines, $7.* In the recent concerted move- 
ment by the engineers and firemen in the 
West, weight on drivers, instead of cylinder 
diameter, was urged as the proper criterion 
of sub-classification, on the ground that driver 
weight was a more accurate index of tractive 
power than cylinder diameter, and, therefore, 
more exactly reflected differences in efficiency, 
labor, and responsibility resulting from the 
operation of larger locomotives. 2 The conduc- 
tors and trainmen make no attempt to estab- 
lish a graduated standard, contenting them- 
selves with a simple classification of service. 

1 Eastern Engineers' Arbitration (1912), Report of Board, 
pp. 6-7. 

2 Western Engineers and Firemen's Arbitration (1915), Em- 
ployees' Brief, pp. 14-15. 



STANDARDIZATION 5 

In the application of system standardiza- 
tion to the employees in a certain grade of 
employment, the men naturally desire the 
removal of low spots in the wage schedule 
without a corresponding decrease in the rates 
of those already receiving above the stand- 
ard. This is accomplished by the insertion in 
their demands of a so-called "saving clause," 
an article providing that existing rates of pay 
that are more favorable to the employees 
than those proposed in the new schedule shall 
be retained. The men usually attempt to 
secure the incorporation of this clause in the 
agreement to arbitrate, and have come to 
regard it as so well established and long ac- 
cepted that it should be included without 
question. 1 The employees base their claims 
for the saving clause on precedent 2 and on 
their restraint in not demanding the highest 



1 In a preliminary meeting held prior to the Eastern Conductors 
and Trainmen's Arbitration in 1913, the roads attempted to secure 
the adoption of an article providing that the rates and rules awarded 
in the coming proceedings should supersede rates and rules then 
in effect which were in conflict therewith. This attempt to render 
the' saving clause inoperative was firmly and successfully resisted 
by the representatives of the employees. In the arbitration pro- 
ceedings, when the question of the saving clause came up, the em- 
ployees' arbitrators refused to vote on the ground that there had 
been an understanding with the government mediators that the 
saving clause articles were not to be submitted to arbitration. See 
Quarterly Journal of Economics, February, 1914, p. 365; Eastern 
Conductors and Trainmen's Arbitration (1913), Report of Board, 
pp. 32-33, 59. 

2 Eastern Engineers' Arbitration (1912), Employees' Brief, p. 43. 



6 DETERMINATION OF RAILWAY WAGES 

rates in existence as the standard rate. 1 It is 
further maintained that the high rates should 
be retained, for their existence is a result of a 
low rate or some other concession elsewhere, 
and it would be manifestly unfair to remove 
an advantage gained in this manner. 2 The 
employees assert, too, that there is nothing in 
the saving clause incompatible with the theory 
of the standard rate, for a standard is a rate 
below which the employer must not pay any 
of his men, but above which he is expected to 
compensate those men, who, on account of 
greater efficiency, deserve payment above the 
standard. 3 

t In reply to the demands of the employees 
for the establishment of system standardiza- 
tion, the railways contend that the standard, 
being a uniform rate applicable to all the em- 
ployees of a given grade, can be applied only 
where uniform conditions exist. 4 Physical and 
traffic conditions cannot possibly be made 
uniform, and therefore it is unfair to the men 
to attempt the application of a standard rate. 
The railways hold that the differences be- 

1 Western Engineers and Firemen's Arbitration (1915), Em- 
ployees' Brief, pp. 3-4. 

2 Eastern Engineers' Arbitration (1912), Employees' Brief, p. 44. 
* Ibid., p. 45; Western Engineers and Firemen's Arbitration (1915), 

Employees' Brief, p. 4. 

4 Eastern Firemen's Arbitration (1913), Railways' Brief, p. 15; 
Chicago, Burlington and Quincy Arbitration (1914), Proceedings, 
pp. 9576-9577. V 



STANDARDIZATION 7 

tween main and branch lines, between moun- 
tainous and level grades, routes with heavy 
and light traffic, etc., should be reflected in 
the wages received by those working under 
these varying conditions. 1 A single rate, ap- 
plicable to all employees of one grade, regard- 
less of the local conditions affecting their 
service, would clearly work to the men's dis- 
advantage. 2 

The railways assert, also, that the stand- 
ard, because it is a uniform rate, is "subject 
to the criticism that it fails to distinguish effi- 
ciency from inefficiency, takes away from the 
employee the incentive to exert himself be- 
yond the unavoidable minimum, and thus 
stifles competition of labor with labor, greatly 
increasing the cost of production." 3 The 
saving clause, however, which aims to retain 
rates higher than the standard and tends to 
lessen the uniformity so vehemently criti- 
cized by the railways, is strongly condemned 
on the ground that it is inconsistent with the 

1 Eastern Engineers' Arbitration (1912), Railways' Brief, p. 25. 

2 For a detailed account of the objections to standardization, see 
Cunningham, "Standardizing the Wages of Railroad Trainmen," 
Quarterly Journal of Economics, November, 1910, pp. 139-160. The 
railways have also objected to the standard rate on account of the 
difficulty of ifcs application. Since these difficulties are peculiar to 
railway service, and do not affect the principle of the standard, the 
consideration of them is omitted in this paper. See Eastern Fire- 
men's Arbitration (1913), Railways' Brief, pp. 13-14; Eastern 
Conductors and Trainmen's Arbitration (1913), Railways' Brief, 
pp. 11-12. 

3 Eastern Engineers' Arbitration (1912), Railways' Brief, p. 13. 



8 DETERMINATION OF RAILWAY WAGES 

plea for uniformity. The roads claim that 
the establishment of a standard implies 
the "equalization of dissimilar rates"; x and 
therefore, if the low rates in the wage sched- 
ule are raised to the standard, then similarly 
the high rates should be lowered. Since the 
saving clause permits the raising of the low 
rates without a lowering of the high rate, it 
prohibits any equalization of dissimilar rates 
and defeats the uniformity desired by the 
employees. 2 In other words, the railways 
condemn a standard rate because they con- 
sider it to be a single uniform wage, and then 
they condemn a provision which tends to les- 
sen uniformity by retaining certain payments 
above the standard. A more convincing argu- 
ment against the saving clause is found in the 
assertion of the railways that it insures the 
employees against any loss in a wage dis- 
pute, and therefore, by encouraging numer- 
ous and excessive demands for increases, 
fosters agitation and strife. 3 

American arbitration boards have been 

1 Western Engineers and Firemen's Arbitration (1915), Report 
of Board, p. 26. 

2 Eastern Engineers' Arbitration (1912), Railways' Brief, pp. 
13-15; Eastern Firemen's Arbitration (1913), Railways' Brief, 
pp. 3, 56, Proceedings, p. 2473; Eastern Conductors and Train- 
men's Arbitration (1913), Railways' Brief, pp. 47-48; Proceedings, 
p. 2009. 

8 Eastern Firemen's Arbitration (1913), Railways' Brief, p. 56; 
Eastern Conductors and Trainmen's Arbitration (1913), Rail- 
ways' Brief, p. 48. 



STANDARDIZATION 9 

practically unanimous in their approval of the 
principle of system standardization. In all 
the large concerted movements and in dis- 
putes involving only one road, the service 
classifications suggested by the employees 
have, with few exceptions, been adopted and 
at least one standard rate applied to each 
class of service. In this manner most of the 
complicated differences in rates of compensa- 
tion for similar service have been removed, 
the boards evidently recognizing the disad- 
vantages attending a wide diversity of rates. 
It is impossible to say, however, whether the 
establishment of the standard rates was 
prompted more by the superior weight of the 
employees' arguments than by the inability 
of the boards to determine the rate commen- 
surate with the labor involved on each par- 
ticular run. Thus, although the Eastern En- 
gineers' Board of 1912 held that " . . . local 
variations in the character of the service 
should be reflected, to a reasonable extent, 
in the rates of pay, . . ." and that there was 
no warrant for imposing one rate without 
regard to local differences on the same road, 
it found itself unable " . . .to adjust the com- 
pensation for each class of service and each 
kind of engine for each of the roads . . . ,' n and 

1 Eastern Engineers' Arbitration (1912), Report of Board, pp. 
23-24, 77-78. 



10 DETERMINATION OF RAILWAY WAGES 

awarded a single standard rate for the various 
classes of service. It may be said that the at- 
titude of the boards is a recognition of the 
fact that a multiplicity of rates may become a 
hardship to a number of employees, and there- 
fore, as far as possible, a standard has been 
awarded. They have refused, however, to 
commit themselves by definite statement to 
the principle that, regardless of varying phys- 
ical and traffic conditions on the same road, 
a standard rate should be applied uniformly 
to all the employees of a given grade in a given 
service. X 

In regard to the form of the standard rate, 
most of the boards in those cases involving 
engineers and firemen have established the 
graduated standard, — the criterion, as a rule 
being weight on drivers. The Eastern En- 
gineers' Award of 1912, in which no gradu- 
ated standard was granted, is an exception. 
The recognition of the demands of the em- 
ployees in this respect may be regarded as an 
attempt to provide for a definite payment 
above the standard to compensate for greater 
efficiency, labor, or responsibility. The eco- 
nomic handling of a large locomotive re- 
quires more efficiency in firing and in opera- 
tion than is necessary in the case of a small 
one, and the increased length of the train 
hauled places more responsibility upon the 



STANDARDIZATION 11 

crew. Without a graduated standard, it is 
likely that the railways would make little dif- 
ference in compensation above the standard 
according to the efficiency, labor, and re- 
sponsibility involved in the operation of 
larger locomotives. The boards, therefore, 
have awarded the graduated rate in order to 
counteract this unmistakable tendency. 
yThe boards have dissented with one voice 
from the position of the railways that the 
standard rate should be established by an in- 
crease in the low rates in the schedules and a 
corresponding decrease in the high rates. In 
granting the saving clause, recognition has 
been given to the employees' claim that the 
standard rate is a minimum only and never a 
maximum and that there is nothing to prevent 
the roads from paying wages above the stand- 
ard. It is recognized that standardization is 
always an upward movement, accomplished 
by increasing lower rates to an ever rising 
standard, those rates higher than the standard 
being retained. In the past, however, the 
privileges of the saving clause have been 
abused at times by a combination of the 
newly awarded provisions with the more 
favorable existing conditions, resulting in a 
still further increase of some of the high rates. 
Several of the boards have endeavored, there- 
fore, to define the meaning of the saving 



12 DETERMINATION OF RAILWAY WAGES 

clause more clearly. The Eastern Firemen's 
Board of 1913, for instance, compelled the 
employees to accept the amended rates and 
conditions, or to retain the old rates and con- 
ditions; and the Eastern Conductors and 
Trainmen's Award of the same year provided 
that the earnings of the employees concerned 
should not be diminished by the terms of the 
award, but also that earnings should not 
". . . be increased above what the higher rates 
of pay and the conditions that were better 
antecedent hereto guaranteed them, by a 
combination of the rates herein established 
with the conditions antecedent hereto or 
vice versa." x 

II. District Standardization 
District standardization is the application 
of a standard rate uniformly to all railways 
within a certain district. The desire for the 
general application of this principle arose 
from the wide diversity of rates and working 
conditions which existed on different roads 
throughout the United States. Negotiations 
between official representatives of each rail- 
road and committees representing the em- 
ployees of that road might result in system 
standardization, but collective bargaining on 

1 Eastern Conductors and Trainmen's Arbitration (1913), Re- 
port of Board, p. 53. 



STANDARDIZATION 13 

this scale could not abolish the wide differ- 
ences in rates between the various roads 
within the district. Strength of organization, 
large membership and aggressive methods, 
combined with a measure of liberality on the 
part of employing officials served to give em- 
ployees on many roads higher wages and 
more favorable working conditions than those 
on other roads where wage bargaining was not 
carried on under these conditions. 1 The nat- 
ural result of this system of bargaining was a 
great diversity in railway wage rates through- 
out the United States. Some roads recog- 
nized only two types of service, passenger 
and freight; others sub-classified freight serv- 
ice into local and through freight; some in- 
cluded switching service as a separate cate- 
gory. Again, roads adopted various bases of 
pay, by mileage, trip, day, or month. En- 
gineers were usually paid according to the 
size of the locomotive operated; but even 
here no uniformity prevailed, for compen- 
sation varied according to several criteria, 
total weight, weight on drivers, or diameter 
of cylinder. 

The railway employees sought to end this 
chaotic condition of affairs by extending the 

1 Western Engineers and Firemen's Arbitration (1915), Em- 
ployees' Brief, p. 2; Eastern Firemen's Arbitration (1913); Sup- 
plemental Report, International President, Concerted Movement 
(1913), Employees' Brief, pp. 1192-1193. 



14 DETERMINATION OF RAILWAY WAGES 

standard rate over a wider area than the 
single road or system; they planned to estab- 
lish uniformity on all the roads in a certain 
district. In 1902 the employees on the railways 
west of the Mississippi River inaugurated 
the movement for district standardization. 
Prior to this date, approximate uniformity 
had been secured merely by separate nego- 
tiations with the officials of individual roads. 
Further steps toward standardization and a 
higher rate were halted by the contention 
of the roads that they were already paying 
as much as their neighbors and could not 
be expected to set up a new standard. 1 The 
check was temporary, however, for the chief 
executives of the Order of Railway Conduc- 
tors and the Brotherhood of Railroad Train- 
men conceived the idea of a concerted move- 
ment of all members of their organizations 
west of the Mississippi. It was for the specific 
purpose of encouraging district standardiza- 
tion that concerted wage bargaining was de- 
vised. 2 A meeting at Kansas City in June, 
1902, resulted in the formation of the West- 
ern Association of General Committees of the 
Order of Railway Conductors and the Broth- 
erhood of Railroad Trainmen. This Associa- 
tion drew up a schedule of rates, which, after 

1 Proceedings of the Railway Conductors, 1903, pp. 18 ff. 

2 Eastern Firemen's Arbitration (1913), Proceedings, p. 2356. 



STANDARDIZATION 15 

being almost unanimously approved by the 
rank and file of the organizations, was sub- 
mitted simultaneously to the management of 
the separate roads. The first roads on which 
a settlement was concluded were the Mis- 
souri, Kansas and Texas, the Missouri Pacific, 
the Frisco, and the St. Louis Southwestern, 
and these rates were gradually adopted by 
separate agreement on the other roads west 
of the Mississippi. 1 

In the next concerted movement in the 
West conducted by the Brotherhood of Lo- 
comotive Engineers in 1906, a new plan of 
dealing with the railways was tried. Instead 
of effecting separate agreements with the in- 
dividual roads, settlement was made for all 
the railways in one series of negotiations be- 
tween the representatives of the employees 
and a Conference Committee of General 
Managers, appointed by the railways and 
given power to arrange a schedule applicable 
to the whole territory. 2 With a few excep- 
tions, this plan has been followed in succeed- 
ing concerted movements. The result of these 
wholesale wage negotiations in the West was 
virtual standardization of wages and working 
conditions of the conductors and trainmen on 
a distinct basis. The railways were less in- 

1 Proceedings of the Railway Conductors, 1903, pp. 18 ff.; ibid., 
1905, p. 10 ff. 

2 Ibid., 1907, p. 71. 



16 DETERMINATION OF RAILWAY WAGES 

clined to refuse the demands of the employees 
than they had been when individual roads 
only were concerned. By this new method of 
wage bargaining, the employees brought the 
full force of their organization in a vast terri- 
tory to bear upon the railways, and the latter, 
fearing a general tie-up of traffic by a strike 
and knowing the effect which this would have 
upon the public, were led to accede to the 
men's demands. 

The success of the Western Conductors' 
and Trainmen's concerted movement in 1902 
assured the adoption of this method in future 
negotiations. The Engineers and Firemen 
soon fell into line, but the Conductors and 
Trainmen took the lead in the formation of 
associations of general committees in other 
sections of the country. The question of a 
Southern Association of these two organiza- 
tions was discussed as early as November, 
1903, but it was not until a meeting in At- 
lanta, in February, 1905, that definite action 
resulted in the organization of the Southern 
Association. 1 The first Eastern Association 
of General Committees was organized by the 
Conductors and Trainmen in a meeting at 
Buffalo in March, 1907, but a concerted 
movement for increased wages was deferred 
on account of the prevailing business depres- 

1 Proceedings of the Railway Conductors, 1905, pp. 79-80. 



STANDARDIZATION 17 

sion. 1 At the present time, all the train- 
service unions in the United States 2 have 
machinery for the formation of Associations 
of General Committees or Federated Boards 
to conduct concerted wage movements. The 
Conductors and Trainmen usually unite in 
their movements, and recently the Engineers 
and Firemen have laid aside their former ani- 
mosity, and have agreed upon a plan of fed- 
eration, 3 which was put into practical opera- 
tion in their Western concerted movement 
early in 1915. Although there have been 
numerous attempts to federate the four train- 
service brotherhoods in one concerted move- 
ment, only once has this been accomplished, 
when in 1908, at the request of the Western 
railways, representatives of the four organiza- 

1 Proceedings of the Railway Conductors, 1907, pp. 72-73 ; ibid., 
1909, pp. 89-96. 

2 The three railway districts recognized by the Interstate Com- 
merce Commission are defined by the Eastern Engineers' Arbitra- 
tion Board (1912) as follows: "The Eastern District comprises that 
portion of the United States bounded on the West by the northern 
and western shores of Lake Michigan to Chicago, thence by a line 
to Peoria, thence to East St. Louis, thence down the Mississippi 
River to the mouth of the Ohio River, and on the South by the Ohio 
River from its mouth to Parkersburg, West Virginia, thence by a 
line to the southwestern corner of Maryland, thence by the Potomac 
River to its mouth. The Southern District comprises that portion of 
the United States bounded on the north by the Eastern District, and 
on the West by the Mississippi River. The remainder of the United 
States, exclusive of Alaska and of island possessions, is included in 
the Western District" (Eastern Engineers' Arbitration (1912), Re- 
port of Board, note, pp. 12-13). 

3 Joint Agreement of May 17, 1913; Constitution of Brotherhood 
of Locomotive Firemen and Enginemen, 1913, p. 157. 



18 DETERMINATION OF RAILWAY WAGES 

tions signed an agreement concerning the 
application of the Federal Hour Law. 1 At 
this writing, the train-service employees are 
considering a nation-wide, federated move- 
ment to secure a universal eight-hour day and 
time and a half for overtime. X 

Since the inauguration of the concerted 
movement in the Western District in 1902, 
eighteen such movements have been con- 
ducted by the train-service organizations, 
nine in the West, five in the South, and four 
in the East. 2 Undoubtedly they have been of 
benefit to the employees both in removing the 
injustices attending the lack of standardiza- 
tion, and in raising wages and improving 
working conditions. The railways, too, have 
benefited, for the concerted movement, by 
making district standardization possible, has 
removed a source of irritation and ill-feeling 
between the employees and the railway man- 
agements. As to the future, it is safe to say 

1 Proceedings of the Railway Conductors, 1909, pp. 82-85. 

2 These eighteen concerted movements were as follows: (1902), 
Conductors and Trainmen in the West; (1906), Engineers in the 
West; (1907), Conductors and Trainmen in the West, Firemen in 
the West, Engineers in the South, and Conductors, Trainmen, Fire- 
men, and Engineers in the South; (1908), Conductors, Trainmen, 
Engineers and Firemen in the West; (1910), Conductors and Train- 
men in the West, Firemen in the West, and Engineers in the West, 
Conductors and Trainmen in the South, Conductors and Train- 
men in the East; (1911), Engineers in the South; (1912), Conduc- 
tors and Trainmen in the South, Engineers in the East; (1913), Con- 
ductors and Trainmen in the East; Firemen in the East; (1915), 
Engineers and Firemen in the West. 



STANDARDIZATION 19 

that movements involving sometimes as many 
as one hundred thousand men and costing 
thousands of dollars will not be undertaken 
upon trivial grounds. 1 Thus there will un- 
doubtedly be a lessening in the number of 
demands for wage increases on petty and 
frivolous grounds; and the organizations and 
the railways, instead of wasting energy and 
money and threatening public welfare in nu- 
merous small disputes, may turn their atten- 
tion to the settlement of such larger questions 
as the eight-hour day and the proper pay- 
ment for overtime. 2 

The four train-service brotherhoods in the 
United States agree that within the Eastern, 
Southern, and Western Districts a standard 
rate should be applied uniformly on all the 
roads. This has been the chief contention of 
the employees in all concerted movements in- 
volving the roads within a district, and in 
those disputes involving only a single road, 
the employees have invariably claimed that 
they were not receiving the rate paid for the 
same service on other roads in that district. 3 

1 Address of Hon. Seth Low before the annual meeting of the Na- 
tional Civic Federation in 1914, quoted in The Railway Library, 
1913, p. 153. 

2 The Railroad Trainmen, September, 1914, p. 848. 

3 This claim was introduced in the Chicago and Western Indiana 
and Belt Railway Co. Arbitration; Chicago, Burlington and Quincy; 
Georgia and Florida; Coal and Coke; Denver and Rio Grande; 
Wheeling and Lake Erie, Wabash, Pittsburgh Terminal, West Side 
Belt Railway. 



20 DETERMINATION OF RAILWAY WAGES 

The employees point to the diversity of rates 
existing on different lines as one of the chief 
sources of disputes with the railways. The 
men on a certain road are bound to be dis- 
contented and restive if they know that their 
fellow workmen in the same grade of employ- 
ment on a neighboring line are receiving a 
higher rate of pay. 1 Another disadvantage of 
a lack of uniformity, the men assert, is the 
absolute impossibility of making exact com- 
parisons in wages from year to year. This is 
evidenced by the difficulty experienced by all 
arbitration boards in discovering just what 
has been the increase in wages in a given 
period of time. 2 The employees claim, also, 
that since a standard rate covering areas as 
large as the railway districts has been estab- 
lished with beneficial results in other in- 
dustries, their demands may be based on 
precedent. Thus the firemen in the Eastern 
Arbitration of 1913 called attention to the 
peace and contentment existing among the 
miners, printers and building trades where a 
district standard is applied, in comparison 
with the discontent and unrest of the steel 
and textile workers. 3 

1 Western Engineers and Firemen's Arbitration (1915), Proceed- 
ings, p. 7409. 

2 Ibid., Employers' Brief, pp. 6-7; Eastern Firemen's Arbitration 
(1913), Proceedings, pp. 2358-2359. 

3 See also Western Engineers and Firemen's Arbitration (1915), 
Employees' Brief, p. 3. 



STANDARDIZATION 21 

The employees maintain that the varying 
physical and traffic conditions on the different 
roads should not constitute a basis for the 
payment of various rates. It may be true, 
they hold, that physical conditions and traf- 
fic peculiarities differ as between individual 
roads, but it would be impossible to deter- 
mine a separate rate of pay for each special 
condition. In the course of the development 
of the railways conditions are always chang- 
ing. Grades may be leveled, additional 
tracks laid, curves straightened, passenger 
and freight densities may differ from year to 
year and from day to day. The attempt to 
determine the proper rates for each different 
condition, and to change them as the condi- 
tions change, the employees assert, is obvi- 
ously absurd. The plan of fixing a standard 
rate governing an entire district may be illogi- 
cal and its basis arbitrary, but "it is deemed 
the best devised and does substantial justice 
in a broader sense than any other system." 1 
If the roads were allowed to fix rates on the 
basis of varying conditions, discriminations 
between the employees on different roads 
would surely follow. A standard rate in 
force on all the roads in a district is claimed 
to be the only equitable system. 2 

1 Chicago, Burlington and Quincy Arbitration (1913), Proceed- 
ings, pp. 9789-9791. 

2 Western Engineers and Firemen's Arbitration (1913), Em- 
ployees' Brief, p. 1. 



22 DETERMINATION OF RAILWAY WAGES 

Another phase of the employees' argument 
against the relation of rates and conditions con- 
cerns the ability of the separate roads to pay 
the standard rate. The brotherhoods assert 
that rates within the district should not be 
influenced by the relative wealth of the roads 
but that all should be required to pay the 
standards of the district whether their finan- 
cial condition be prosperous or otherwise. 
The reasons upon which this position is based 
are manifold. In the first place, the employees 
hold that the efficiency of a workman of a 
certain grade employed on a prosperous road 
is just as great, his labor is equally onerous, 
and his risk and responsibility are the same 
as the efficiency, labor, and responsibility of a 
workman employed on a bankrupt line, and 
therefore that there is no justification for any 
difference in the wages paid. 1 Again, the em- 
ployees maintain that just as the separate 
roads are obliged to purchase cars, coal, loco- 
motives, and other equipment at a uniform 
price regardless of their varying financial con- 
ditions, they should be required to purchase 
their labor at a uniform price. 2 Further, it is 
not the custom in other industries to permit 
an unprosperous firm to pay wages below the 
standard. All employees are on the same level 

1 Western Engineers and Firemen's Arbitration (1915), Em- 
ployees' Brief, pp. 4-5. 

2 The Railroad Trainman, February, 1910, p. 152. 



STANDARDIZATION 23 

in this respect. 1 In final support of their posi- 
tion, the employees refer to the numerous de- 
cisions of Federal courts in which it has been 
held that the inability of a road to pay divi- 
dends on its stocks and interest on bonds, or 
the necessity for the issuance of receivers' cer- 
tificates to defray expenses of operations, is 
not sufficient cause for reducing wages below 
those paid on other lines in the vicinity for 
similar work. 2 

The railways oppose district standardiza- 
tion on the ground that rates cannot be dis- 
associated from conditions and since condi- 
tions vary widely on different roads in such 
extensive territories as the railway districts, 
they maintain that rates cannot be made 
uniformly applicable on all the roads. The 
amount of compensation, the roads hold, is 
governed by the labor performed, the skill 
and efficiency required, the responsibility and 
hazard involved, the discipline necessary, the 
rapidity of promotion, and the cost of living. 8 
These various elements depend, for the 
greater part, upon the physical conditions 
under which the labor is performed, the na- 

1 Eastern Firemen's Arbitration (1913), Employees' Brief, p. 
1206. 

2 Eastern Engineers' Arbitration (1912), Employees' Brief, pp. 
10-14; Eastern Firemen's Arbitration (1913), Employees' Brief, 
pp. 1206-1209; Western Engineers and Firemen's Arbitration (1915), 
Employees' Brief, pp. 4-5. 

1 Coal and Coke Arbitration (1911), Proceedings, p. 1012. 



24 DETERMINATION OF RAILWAY WAGES 

ture of the territory through which the line 
operates, which governs the length and dif- 
ficulty of the runs, the number of tracks, 
curves, crossings, etc., the size of locomotives 
and trains, and the number of tons or passen- 
gers carried per train. 1 In so far as these con- 
ditions are similar on the different railways 
within a certain territory, the roads admit 
that the rates may properly be made uniform, 
for identical pay for identical service is just. 2 
But it is impossible to make these conditions 
similar on all the roads, and therefore, where 
differences exist, they should be reflected in 
the rates of compensation. 3 District stand- 
ardization can be accomplished only by fixing 
rates upon some arbitrary basis, and this will 
be done at the expense of justice and equity. 4 
The railways maintain, further, that the 
rate of compensation should bear some rela- 
tion to the earning capacity of the different 

1 Georgia and Florida Arbitration (1914), Report of Board, p. 2; 
Coal and Coke Arbitration (1911), Proceedings, p. 1013; Eastern 
Firemen's Arbitration (1913), Railways' Brief, p. 7; Eastern En- 
gineers' Arbitration (1912), Railways' Brief, pp. 7-8, 15-17. 

2 Western Engineers and Firemen's Arbitration (1915), Pro- 
ceedings, p. 7560; Eastern Firemen's Arbitration (1913), Railways' 
Brief, p. 15; Eastern Engineers' Arbitration (1912), Railways' Brief, 
p. 15. 

8 Wheeling and Lake Erie, etc., Arbitration (1913), Proceedings, 
pp. 309-310; Eastern Firemen's Arbitration (1913), Railways' 
Brief, p. 15; Coal and Coke Arbitration (1911), Proceedings, pp. 
1011-1013; Eastern Engineers' Arbitration (1912), Railways' Brief, 
p. 15. 

4 Eastern Firemen's Arbitration (1913), Railways' Brief, p. 61. 



STANDARDIZATION 25 

roads, for, otherwise, uniformity would re- 
sult in an undue burden upon the less pros- 
perous lines. It is intimated that the stand- 
ard rate demanded by the employees is 
determined by the ability of the more pros- 
perous roads to pay and that the financially 
weaker lines are in danger of having their 
revenues so cut by the increase in wages as 
seriously to impair their credit and to force 
the suspension of dividends. 1 The railroad's 
representative in the Georgia and Florida 
Arbitration (1914) maintained that since the 
road concerned was not earning dividends, if 
the employees were to receive as a right what 
the employer did not earn, it would be a clear 
case of confiscation. The road would become 
insolvent and the stockholders would suffer. 2 
The public also would feel the effect of the 
men's demands, for those sums from which 
money is deducted to replace rotten cross- 
ties, unsafe bridges and steel cars, and to give 
the general public safe and satisfactory serv- 
ice, would be diminished by just so much 
as the employees demanded. 3 Each individ- 
ual road, therefore, should pay the wages 
which its financial standing permits, and in 

1 Eastern Engineers' Arbitration (1912), Railways' Brief, pp. 
18-20. 

2 Georgia and Florida Arbitration (1914), Report of Board, pp. 
8-9, 11. 

3 Ibid., p. 9. 



26 DETERMINATION OF RAILWAY WAGES 

those cases involving a number of roads, the 
rate paid by each should be considered sepa- 
rately and should bear some relation to the 
road's financial capacity. 

In addition to the above arguments against 
district standardization, the railways deny 
the employees' claim that other industries 
pay a standard rate in an area as large as 
the railway districts. 1 Everywhere there is a 
wide diversity in wages, and this fact, the 
railways claim, is sufficient reason for the 
boards to decline district standardization. 

Railway arbitration boards have not taken 
any consistent stand on the question of dis- 
trict standardization from which a general 
statement as to their attitude can be made. 
The acceptance of the principle of district 
standardization is conditioned upon the ac- 
ceptance of the employees' claim that rates 
should not be influenced by physical and 
traffic conditions peculiar to individual roads 
nor by the varying ability of separate roads 
to pay the standard. The Eastern Engineers' 
Board (1912) refused to take the employees' 
view, holding that it was improper to award 
the same rate of compensation without re- 
spect to differences on the roads in the East- 
ern District. The reasons given for this find- 

1 Eastern Engineers' Arbitration (1912), Railways' Brief, pp. 
17-18; Eastern Firemen's Arbitration (1913), Railways' Brief, p. 7, 
Proceedings, pp. 2473-2474. 



STANDARDIZATION 27 

ing were that in no part of the country was 
this the practice on the railways and that the 
heavier traffic on certain roads undoubtedly 
made the labor more exacting and onerous. 1 
In the Clark-Morrissey Award on the New 
York Central, the principle of district stand- 
ardization was held to be generally advan- 
tageous, but some variations on account of 
conditions different from other railways were 
recognized and the rates awarded varied ac- 
cordingly. On the other hand, the standards 
granted in the Eastern Engineers', Firemen's, 
and Conductors and Trainmen's awards, and 
in the Western Engineers and Firemen's 
Award, and made applicable to all the roads 
within those districts, seem to indicate that 
district standardization has been recognized, 
and if any variations in rates to accompany 
varying conditions on the different roads are 
permitted, the rates are not to be lower than 
the standard granted in these awards. 

In disputes involving single roads the gen- 
eral attitude of the boards has been to award 
rates which will bring wages on the road in 
question to a level with those paid on neigh- 
boring lines. For instance, in the case of the 
Southern Railway vs. Maintenance of Way 
Employees (1913), the board resorted to 

1 Eastern Engineers' Arbitration (1912), Report of Board, pp. 
23-24, 



28 DETERMINATION OF RAILWAY WAGES 

". . . a comparison with labor on other rail- 
roads where duties are the same and classi- 
fications nearly identical." 1 And, again, in the 
Georgia and Florida Arbitration (1914) the 
board held that the rates ". . . should con- 
form as nearly as may be to the rates paid by 
the other roads for similar service in the same 
section of the country. 2 This has been the 
usual practice in Canada, although there 
have been exceptions. 3 In the case of the 
Grand Trunk Railway vs. Conductors and 
Trainmen (1910) the board stated that the 
men "... are justified in asking that roads in 
the same territory should standardize their 
rates of pay and their rules also so far as they 
may deal with like general conditions of 
service." 4 The chairman appointed in the 
case of the Canadian Pacific Railway vs. 
Maintenance of Way Employees (1914) held, 
similarly, that there was no reason why ". * . 
one equally capable member of the same 
brotherhood, doing the same work, should be 

1 Southern Railway Arbitration (1913), Report of Board, p. 14. 

2 Georgia and Florida Arbitration (1914), Report of Board, p. 2. 
8 The board, in the case of the Conductors and Trainmen vs. the 

Canadian Pacific Railway (1914), refused to grant a uniform schedule 
for the Prairie and Pacific divisions on account of " . . . the various 
peculiar existing conditions surrounding the service on the Prairie 
and Pacific Divisions, arising from the natural physical conditions, 
climatic conditions and the length of the train mileage and time 
allowed therefor ..." (Report, Registrar of Boards of Concilia- 
tion and Investigation, 1915, p. 119). 

4 Grand Trunk vs. Conductors and Trainmen (1910), Report, 
Registrar of Boards of Conciliation and Investigation, 1911, p. 133. 



STANDARDIZATION 29 

paid less, or be under greater disadvantages 
in any way in his service than another simply 
because one happened to be employed on one 
railway and the other on another." 1 

In regard to the plea of individual roads 
that they are unable to pay, the findings of 
arbitration boards have been fairly uniform 
in favor of the employees' claims. The board 
in the Southern Railway case against the 
Maintenance of Way Employees, however, 
held that the road had fully established its 
inability to pay, and although an average 
rate was awarded, the board asserted that 
". . . the fair rule would probably be to fix 
wages not at the highest nor even at the aver- 
age rate, but at the lowest rate that could 
readily command the services that were 
needed." 2 This finding is an exception. In 
the dispute involving the switchmen on roads 
leading into Chicago, the roads claimed that 
the ability of each to pay should be consid- 
ered separately, but the board overruled this 
point by the statement that ". . . this is a 
joint arbitration to which there are virtually 
two parties. . . ." The board went on to say 
that "... in its findings it has endeavored 
to adapt itself to the average of the lines, 
rather than upon either extreme. . . . We 

1 Canadian Pacific vs. Maintenance of Way Employees (1914), in 
Labour Gazette (Canada), February, 1914, p. 907. 

2 Southern Arbitration (1913), Report of Board, p. 6. 



30 DETERMINATION OF RAILWAY WAGES 

are also of the opinion that those companies 
must be regarded as able to pay operating 
cost, including, of course, just and reasonable 
wages to the class of employees parties to 
this arbitration." * The Georgia and Florida 
Board hold that, although the road was not 
earning enough to meet its expenses, "the 
employees have the first claim on the earn- 
ings of a road for a reasonable wage to be 
determined not by the financial condition of 
the company, but by the rates paid by other 
roads in the same section of the country for 
the services." 2 

In the large concerted movements the roads 
have always been considered as a whole, the 
boards refusing to permit the condition of 
individual roads to influence the payment of 
a standard rate throughout the district. The 
position of the board in the Eastern Engineers' 
Arbitration (1912) is typical. Upon investi- 
gation it was found that the New York Cen- 
tral, New Haven, Pennsylvania, Baltimore 
and Ohio, Reading, and Erie controlled di- 
rectly eighty per cent of the mileage operated 
in the Eastern District, and that some of the 
independent roads were indirectly controlled 
through a system of interlocking directo- 
rates. A dependent road, while unprofitable 

1 Chicago Switchmen's Arbitration (1910), Railway Age Gazette, 
Vol. XLvni, No. 14, pp. 960-961. 

2 Georgia and Florida Arbitration (1914), Report of Board, p. 4. 



STANDARDIZATION 31 

in itself, might be profitable to the system 
to which it belongs by serving as a valuable 
feeder to a larger line. For these reasons the 
arguments of the less prosperous roads as to 
their inability to pay were held to be some- 
what weakened. The board maintained that 
it was unable to state with any certainty 
whether the less prosperous roads were able 
to pay, but it eliminated the claim of the 
roads, and applied a standard rate uniformly 
to profitable and unprofitable roads. 1 

III. National Standardization 

Railway employees in all sections of the 
country are committed to the policy of dis- 
trict standardization; the employees in the 
Eastern District, however, entertain the ideal 
of national uniformity, the payment of a uni- 
form standard rate throughout the United 
States. In the three concerted movements 
conducted by the Eastern Engineers, Fire- 
men, and Conductors and Trainmen since 
1912, the employees have urged the adoption 
of a rate which would reduce or entirely 
abolish the differential in wages existing in 
favor of the West over the East. Until 1910 
the wage scale in the South had always been 
less than in the East, and in the West, train- 

1 Eastern Engineers' Arbitration (1912), Report of Board, pp. 
25-46. 



32 DETERMINATION OF RAILWAY WAGES 

service employees have always enjoyed a 
differential over those in the other railway 
districts. According to information obtained 
by the Eastern Conductors and Trainmen's 
Board, engineers in the West in 1913 re- 
ceived a wage 5.3 per cent in excess of that 
paid to the same class in the East; firemen, 
7.3 per cent; conductors, 16.1 per cent; and 
brakemen 7.1 per cent. 1 The employees in 
the East propose to abolish these differen- 
tials for they consider that the more favor- 
able position of the Western men is due to the 
earlier and more aggressive activity of the 
employees in the Western District, and not 
to any essential differences between the dis- 
tricts. 

The employees base their claim for na- 
tional standardization on the ground that 
railroad service, regarded from a purely 
technical point of view, is practically identi- 
cal the country over, with the exception of 
the mountainous districts in the West, where 
permanent natural conditions justify the 
payment of higher compensation. They 
assert that the equipment handled by the 
employees has been standardized to a great 
extent; that motive power specifications and 
conditions of gradient and curvature are 

1 Eastern Conductors and Trainmen's Arbitration (1913), Re- 
port of Board, p. 8. 



STANDARDIZATION 33 

virtually the same; and that employees are 
held responsible under the same code of dis- 
cipline. 1 Since there is uniformity of opera- 
tion, of requirements, and of labor existing 
throughout the East and West, there is no 
justification for the payment of a favorable 
differential in the latter district. The em- 
ployees claim, furthermore, that living con- 
ditions in these two areas are practically 
identical. There is little difference in the 
cost of necessary commodities; while the en- 
vironment, that is, climatic conditions and 
opportunities for education, for religious ob- 
servances, and for recreation, is practically 
the same East and West. 2 

Indeed, the employees claim, if any dis- 
trict enjoys a favorable differential, it should 
be the East; for some of the conditions sur- 
rounding railroad service are less desirable 
in that district than in any other section of 
the country. Thus the Eastern Engineers 
point out that the traffic in the East is more 
congested, that there are more block signals 
to look out for, and more requirements as to 
time schedules and high speed. 3 The Con- 
ductors and Trainmen assert also that the 

1 Eastern Conductors and Trainmen's Arbitration (1913), Report 
of Board, pp. 11-12; Proceedings, 1915, pp. 872-874. 

2 Ibid., Proceedings, pp. 1910-1914. 

3 Eastern Engineers' Arbitration (1912), Employees' Brief, p. 
22. 



34 DETERMINATION OF RAILWAY WAGES 

average time on duty is longer in the East 
than in the West. 1 

Finally, the Eastern employees claim that 
the wages paid in other trades do not differ 
materially East, West, and South. They 
assert that the railways' exhibits showing 
that higher wages are paid in the West than 
in the East are inconclusive, since the figures 
given fail to make allowance for the lowering 
of wages in the East in certain trades due 
to the strong competition of foreign labor. 
Wages in the East in those industries em- 
ploying foreign labor may be lower than in 
the West, where there is little competition 
with foreigners; but it would be unfair to 
allow this fact to affect the compensation of 
railway labor, which is almost entirely na- 
tive-born throughout the country. 2 

The railways in the Eastern District are 
strongly opposed to the application there of 
the Western rates. They maintain that if 
earnings are considered instead of rates, the 
differences in wages between the East and 
West are not so wide as the employees claim. 
Thus, it w r as pointed out in the Eastern Fire- 
men's Arbitration that there is more construc- 
tive mileage in the East than in the West, 
since in the latter district the railways are 

1 Eastern Conductors and Trainmen's Arbitration (1913), Report 
of Board, p. 13. 

2 Ibid., Employees' Brief, p. 25. 



STANDARDIZATION 35 

able to get longer runs within the minimum 
day. 1 Schedule rates in the West, however, 
the railways admit, are higher and always 
have been, and this very fact is sufficient 
reason for maintaining the differential be- 
tween the two districts. 2 To strengthen this 
position, the roads claim that in other indus- 
tries it is the practice to pay higher wages 
in the West than in the East, and there is 
no justification for the railways overturn- 
ing precedent and establishing national uni- 
formity. 3 

Objection is made also to the use of the 
Western rates as a model for the Eastern. 
The railways claim, on the strength of the 
employees' statement, that the high rates ex- 
isting in the West are a result of the aggres- 
siveness of the Western employees: "Rates 
that have been established by coercion cannot 
justly be cited as a precedent and therefore, 
the rates in the West cannot be used as a ba- 
sis upon which to build the entire rate struc- 
ture of the Eastern Territory. The equity of 
the rates in the West has not been touched 

1 Eastern Firemen's Arbitration (1913), Proceedings, p. 2460; 
Eastern Conductors and Trainmen's Arbitration (1913), Railways' 
Brief, p. 25. 

2 Eastern Conductors and Trainmen's Arbitration (1913), Pro- 
ceedings, p. 2047; Eastern Engineers' Arbitration (1912), Pro- 
ceedings, p. 1969. 

3 Eastern Conductors and Trainmen's Arbitration (1913), Rail- 
ways' Reply Brief, p. 4. 



36 DETERMINATION OF RAILWAY WAGES 

upon by the employees, much less proven, 
and without such proof their value as a deter- 
mining factor in fixing rates for the Eastern 
District is nil." x 

The strongest argument of the railways 
against national standardization is connected 
with the lack of agreement between the em- 
ployees in the Eastern and Western Districts 
regarding uniform rates. The Western em- 
ployees seem to consider that the higher rates 
paid them are just, and insist that the dif- 
ferential between the two districts be main- 
tained. The roads state that after the gen- 
eral increase in wages in the East in 1910, a 
move was immediately started in the West 
based on the argument that the Eastern 
rates had been raised and therefore the West- 
ern rates should be similarly increased so that 
the employees might restore the former dif- 
ferential over the East. 2 There is every in- 
dication, the roads maintain, that this prac- 
tice of using the increases in one district as 
a ground for increases in another will be con- 
tinued, and as long as the employees do not 
agree upon the question of national standard- 
ization, that system is unattainable. 3 This 

1 Eastern Conductors and Trainmen's Arbitration (1913), Rail- 
ways' Brief, p. 9. 

2 Ibid., Railways' Brief, p. 8; Proceedings, pp. 1968-1970. 

5 Eastern Firemen's Arbitration (1913), Proceedings, p. 2459. 
Eastern Conductors and Trainmen's Arbitration (1913), Report 
of Board, p. 64. 



STANDARDIZATION 37 

"endless chain" method of securing wage in- 
creases constitutes a real hardship to the rail- 
ways, and is neither logical nor just. 1 

No arbitration board in the United States 
has given unqualified support to the principle 
of national standardization. The awards in 
the Eastern Engineers', Firemen's, and Con- 
ductors and Trainmen's Arbitrations failed 
to secure for the Eastern train-service em- 
ployees the rates current in the West, al- 
though the increases allowed served to reduce 
the differential between the two districts. 
The Eastern Conductors and Trainmen's 
Board (1913) gave serious attention to na- 
tional standardization, summing up its atti- 
tude in the statement that it could not be 
controlled in its findings by the argument for 
standardization, although it might be in- 
fluenced by it. 2 The extent of this influence 
is shown by the action of the board in raising 
the rates in the Eastern District to the level 
of those in the South, which, on account of 
the concerted movement of the Conductors 
and Trainmen in that territory in 1912, had 
been advanced beyond the Eastern rates. 3 
The board held that uniformity in rates of 
pay in the East and South was justifiable 

1 Eastern Firemen's Arbitration (1913), Proceedings, p. 2056. 

2 Eastern Conductors and Trainmen's Arbitration (1913), Re- 
port of Board, p. 15. 

3 Ibid., Report of Board, pp. 16-17, 35. 



38 DETERMINATION OF RAILWAY WAGES 

because wages in other industries in these two 
districts were practically the same, and, 
further, that it was ". . . an advantage 
worth the cost even partially to eliminate 
from the wage problem of the railroads one 
of the differentials now existing." 1 As to 
uniformity between the East and West, the 
board stated that this was at present im- 
possible, because the differential affecting 
conductors and trainmen between the two 
districts was very large; wages in other in- 
dustries were still higher in the West than in 
the East; and it was not clear that the policy 
of national standardization favored in the 
East was favored by the Conductors and 
Trainmen in the West. 2 In regard to the last 
reason for refusing national standardiza- 
tion, the board stated that "the organiza- 
tions concerned should formally and officially 
commit themselves to the policy of stand- 
ardization between the East and West. In 
the absence of such an accepted policy, were 
this board to place the pay of conductors and 
trainmen in the East, as they are asked to 
do, on the Western basis, such an increase of 
the wage scale in the East might serve ... to 
bring about a new movement in the West to 
secure the old differentialas against the East." 3 

1 Eastern Conductors and Trainmen's Arbitration (1913), Re- 
port of Board, p. 37. 

2 Ibid., Report of Board, p. 15. 3 Ibid., p. 4. 



STANDARDIZATION 39 

It was held, however, that national stand- 
ardization would be of advantage to the em- 
ployees, railways, and public, and, therefore, 
that progress should be made in that direc- 
tion as fast as possible. Interstate railroads, 
the board stated, constituted national public 
utilities, and as such, would be obliged in the 
end to follow the practice of the Railway 
Post-Office Service of paying uniform rates 
regardless of the district. 1 Finally, the board 
suggested that before any further steps were 
taken for the establishment of national 
standardization, some public authority au- 
thorized by Congress should make an inde- 
pendent inquiry as to whether there existed 
any substantial reason for a wage differen- 
tial between the West and East based on 
territorial conditions. 2 

The attitude of the employees, employers, 
and arbitration boards toward system, dis- 
trict and national standardization having 
been outlined, the remainder of this chapter 
will be concerned with a discussion of the 
validity of the principle of standardization 
and an estimate of the possibility of its ap- 
plication in future arbitration proceedings. 

It is unnecessary to enumerate in detail 

1 Eastern Conductors and Trainmen's Arbitration (1913), Re- 
port of Board, pp. 15-16. 

2 Ibid., Report of Board, p. 5. 



40 DETERMINATION OF RAILWAY WAGES 

the advantages of system standardization; 
the payment of standard piece scales within 
a local area is the practice in many trades, 
and also upon many railways, and these 
applications of the principle demonstrate 
its practicability and success. 1 The chief 
objection is that the standard rate tends to 
become the maximum rate paid, and that 
this tendency results in a uniform wage to 
efficient and inefficient workmen. It is true 
that the existing rates higher than the stand- 
ard retained through the saving clause are 
merely temporary; and that the upward 
movement of standardization will ultimately 
result in the gradual rise of the present stand- 
ard to the maximum now existing, thus pro- 
viding one uniform standard for all employees 
of a certain grade in a given service. Under 
such a system of wage payment, it is certain 
that some more capable men will receive the 
same rate of compensation as that paid to 
inferior employees. But there is likely to be 
even more unfairness where lack of a def- 
inite level below which employers may not 
grade their men permits the payment of in- 
sufficient wages. 

On the railways, where mileage is the basis 
of payment, the danger of uniformity in com- 

1 D. A. McCabe, "Standard Rate in American Trade Unions," 
Johns Hopkins University Studies in Historical and Political Sci- 
ence, Vol. xxx, pp. 120-128, 141-142. 



STANDARDIZATION 41 

pensation is largely obviated by giving more 
advantageous runs to older and tried em- 
ployees. Furthermore, the graduated stand- 
ard rate proposed by the men and awarded 
by a number of boards provides for a defi- 
nite payment above the standard to those 
operating locomotives which require greater 
labor in handling and involve more risk and 
responsibility. Weight on drivers, the crite- 
rion ordinarily awarded by the boards, has 
been criticized by the railways on the ground 
that it is not a proper index of tractive power. 
Any criterion selected to measure increased 
efficiency, labor, or responsibility attending 
the operation of larger locomotives is certain 
to be more or less arbitrary. The important 
consideration appears to be uniformity of 
application and continued use of a certain 
criterion, once it has been selected. The 
claim of the railways, therefore, that the 
standard results in a uniform wage must be 
disallowed, for the graduated standard as- 
sures definite payment above that level, and 
thus refutes one of the most serious charges 
against the standard rate. 

The objection of the railways to the sav- 
ing clause on the ground that it defeats uni- 
formity is inconsistent with their objection 
to uniformity on the ground that it does not 
permit the employers to pay wages above 



42 DETERMINATION OF RAILWAY WAGES 

the standard to more efficient men. Like the 
graduated standard rate, the saving clause, 
by retaining rates higher than the standard 
proposed, secures payment above the mini- 
mum level. There is no reason why higher 
paid employees should lower their standard 
of living in order that the railways may find 
it easier to pay adequate wages to the less 
fortunate workmen. Since the granting of 
a standard rate does not of necessity imply a 
uniform rate to all employees of a given grade, 
there is nothing in the saving clause, which 
preserves rates higher than the standard, 
contrary to the theory of a standard rate. 1 

Finally, the standard rate is inevitable 
where collective bargaining is the practice. 
Committees of the employees and of the rail- 
ways, government mediators, or arbitration 
boards are confronted with the problem of 
determining the amount due to each employee 
of the grade of employment concerned. The 
mere number of workmen employed on a 
single road or system renders the determina- 
tion of a rate for each individual an utter 

1 It should be emphasized, however, that the higher rates main- 
tained by the saving clause are, in all likelihood, merely temporary. 
It is only a question of time before the standard is gradually raised 
to the level of the highest existing rate, and then, barring those 
grades of employment in which the graduated standard is paid, one 
uniform standard will be paid to all employees of a certain grade 
in the same class of service. Where this condition is brought about 
there will be no more need for the saving clause. 



STANDARDIZATION 43 

impossibility. The body fixing the rates may 
be convinced that the various physical and 
traffic peculiarities on the particular road 
should be reflected in the rate of pay, but it 
is forced to recognize its inability to deter- 
mine for each employee separately the amount 
commensurate with the labor involved in the 
particular kind of work which he performs. 
Any attempt to determine for each laborer 
the exact quantitative relation between the 
rate of pay and such elements as the num- 
ber of tracks on the division, the percentage 
of curves and grades, or the number of pas- 
sengers and tons of freight hauled would re- 
quire an attention to detail and a nicety of 
calculation attainable only by the method of 
individual bargaining. Collective bargaining, 
which is here to stay, admits of no such ex- 
act fixing of rates, and the committee or board 
must have recourse to the only alternative, 
the establishment of a standard rate, a level 
from which all employees are to start. 

The influence of the form of wage bargain- 
ing upon the system of wages is even more 
marked in the case of district than in system 
standardization. The concerted movement 
was introduced to force the railways to pay 
a standard rate throughout the district re- 
gardless of the differences between the roads. 



44 DETERMINATION OF RAILWAY WAGES 

This was to be accomplished by uniting and 
bringing the full power of the employees to 
bear upon the railways. The power of the 
railway brotherhoods, however, has not forced 
the payment of a standard rate in the East, 
West, and South; the form of wage bargain- 
ing has accomplished this result. When col- 
lective bargaining is conducted on the scale 
of the railway concerted movements, which 
include ordinarily from thirty thousand to a 
hundred thousand men working perhaps on 
fifty railroads, it is impossible for the body 
fixing wages to associate rates with the in- 
numerable varying conditions on the dif- 
ferent roads. The determination of the wages 
of this army of employees lies in the hands 
of a small body — an arbitration board, 
several mediators, or a committee represent- 
ing the employees and railways — and the 
decision must be rendered within a brief 
period. Under such conditions it is impossible 
for the board to consider the different roads 
separately, and it is forced to disregard vary- 
ing physical and traffic conditions, and to 
provide a standard rate applicable uniformly 
to all the roads within the district. The suc- 
cess and convenience of the concerted move- 
ment as a method of wage bargaining warrant 
the assumption that it will be continued, and 
if so, district standardization is inevitable. 



STANDARDIZATION 45 

Just as it is necessary for arbitration boards 
to disregard the different physical and traffic 
conditions of individual roads, so they are 
forced in a concerted movement to consider 
the railways as a unit and not to permit vari- 
ations in net earnings between the roads to 
affect the award of the standard rate. The 
position of American arbitration boards on 
this question is undoubtedly correct. The 
numerous ramifications of intercorporate re- 
lations and the possibility of concealing prof- 
its render it difficult for an arbitration board 
to determine whether a particular road is 
profitable or not, and for these reasons it 
seems improper to deny employees rates 
paid on neighboring lines on the ground that 
the road concerned is unable to meet the in- 
creases required. 

Even the railways are recognizing the fu- 
tility of this objection to district standard- 
ization. If their contention were allowed, the 
employees on an unprofitable road could 
never hope to receive a reasonable wage, 
even assuming that the rates paid in the 
vicinity were reasonable. There is no reason 
why an employee should forego his claim to 
like pay for similar service, merely because 
the railroad on which he works is operated 
at a loss. District standardization, therefore, 
should not be refused on the ground that 



46 DETERMINATION OF RAILWAY WAGES 

individual roads are unable to pay the stand- 
ard of the district. 

District standardization holds out many 
real advantages to all parties concerned in 
the settlement of the wage problem. If the 
employees of a given district agree to the 
principle, and if they succeed in obtaining 
district standardization, every possibility of 
unfair discrimination against them as regards 
wages on the part of the employer is removed. 
No employer will be permitted to pay wages 
below the standard set for the district, and if 
the organizations of the men are powerful, 
it is likely that this standard will represent 
an adequate wage. The payment of a stand- 
ard rate throughout a district will remove 
one of the most serious causes of dispute be- 
tween employers and employees, and this will 
redound to the benefit of the employers and 
the public in the lessening of the number of 
disputes and the chances of an interruption 
to the processes of production. 

Moreover, district standardization will 
undoubtedly facilitate the work of arbitra- 
tion boards and other wage-fixing bodies. 
As the employees have demonstrated, the 
adoption of this principle renders it possible 
to determine with some exactness what the 
actual advance in wages within a given 
period has been. This will enable boards to 



STANDARDIZATION 47 

ascertain whether wages have increased the 
proper amount, and will lessen the chance of 
injustice being done to both sides by an arbi- 
trary increase in wages. A uniform standard 
throughout a large district will also make the 
application of a broad general principle of 
wage advance comparatively simple. For 
instance, if the increase in the cost of living 
were the principle determined upon, it would 
be difficult to estimate the actual per cent of 
increase in the cost of commodities for the 
various incomes resulting from the wide 
diversity of rates. If, however, a standard 
were in force throughout a considerable ter- 
ritory, the increase in the cost of living for 
that income could be calculated, and this 
per cent increase applied uniformly to those 
receiving the standard rate. 

It has been asserted that district stand- 
ardization results in unfair discrimination 
among employees and that "it is a disregard 
of the individual in the larger strategic in- 
terest of the organization as a whole." l Dr. 
F. J. Warne has answered the latter state- 
ment by saying that such a disregard is some- 
thing to be commended rather than criti- 
cized, and the former assertion he claims 
may be true, but "the advantage of stand- 

1 F. H. Dixon, "Public Regulation of Railway Wages," Pro- 
ceedings of American Economic Association, 1914, p. £50. 



48 DETERMINATION OF RAILWAY WAGES 

ardization over any other method is that 
it results in less unfair discrimination — it 
provides a broad basis from which all em- 
ployees within the group are to start." * In 
one respect, however, district standardiza- 
tion may result in very real discrimination. 
The application of a uniform standard over 
an area as large as the railway districts in 
which wide differences in the cost of living 
exist 2 will cause frequent inequalities in the 
real wages paid to those performing similar 
work. The practice in concerted movements 
in the past has been to make no differences 
in rates within a given district even though 
living costs vary greatly between different 
parts of that district. The uniformity thus 
obtained has been uniformity of money 
rather than of real wages. Boards have been 
forced to disregard variations in cost of food, 
rent, etc., between different sections, partly 
by reason of the lack of adequate statistics 
showing the exact differences in the cost of 

1 Proceedings of American Economic Association, 1914, p. 280. 

2 Differences in food prices throughout the United States are 
clearly shown in the reports of the U.S. Bureau of Labor Statistics. 
Variations between cities both in food and rent costs were the sub- 
ject of special study by the British Board of Trade inquiry into the 
cost of living in the United States made in 1911. The variations 
shown for food prices were very wide, from 91 for Detroit to 109 
for Atlanta (New York City = 100). Rents showed even greater 
variations — 52 for Lowell to 101 for St. Louis (New York City 
rents = 100). See Board of Trade Inquiry into the Cost of Living 
in American Towns, 1911, Introduction, pp. xxv-xxvi; xxxiv-xxxv. 



STANDARDIZATION 49 

living, and partly on account of their in- 
ability in large concerted movements to 
allow for variations in living costs in the 
rates. It seems, however, that differences 
in the cost of living between various sections 
of a district should be allowed to affect rates, 
for a standard rate of an absolute amount, 
where there are wide diversities in living 
costs, will accomplish only apparent stand- 
ardization. It is recognized that there are 
many difficulties attending the carrying out 
of this policy; but some general rule for dif- 
ferences in the cost of living may be applied, 
such as that suggested by Sidney and Bea- 
trice Webb, in which a uniform standard rate 
is to be varied by a percentage increase for 
cities and a percentage decrease for purely 
agricultural districts, the assumption being 
that differences in the cost of living between 
sections resolve themselves into differences 
in rents — city rents being higher than coun- 
try rents. 1 On some such broad, general rule, 
differences in living costs may be roughly 
reflected in the standard rate paid within a 
given district. 

One of the counsel for the Western roads 
in the Engineers and Firemen's Arbitration 
in 1915 stated that the West and the East 

1 Webb, Industrial Democracy (1902 ed.), p. 321. 



50 DETERMINATION OF RAILWAY WAGES 

were gradually approaching each other in 
the matter of wages. In pioneer days, when 
the West was sparsely settled, when condi- 
tions of living were unfavorable and when the 
cost of living was higher, rates of wages of all 
laborers were greater in the West than in the 
East. At the present time, however, he said, 
the old hardships were disappearing, condi- 
tions surrounding life were practically the 
same East and West; wages in all employ- 
ments, and the cost of food, rents, fuel and 
light in the East were more and more ap- 
proaching the level of the West. Therefore, 
"there is not a disparity in conditions that 
would justify the payment of a different 
minimum wage in the West from the mini- 
mum fixed in the East." l This statement 
may be true; but the fact remains that, at 
the present time, wages in almost all occupa- 
tions are higher in the West than in the East. 2 
The very existence of such a differential in 
favor of the West is ample justification for 
refusing the award of a standard rate in the 
East equal to that paid in the West. It is 
likely, however, that conditions are gradu- 
ally becoming uniform in these two sections 
of the country, and, therefore, the suggestion 
of the Eastern Conductors and Trainmen's 

1 Western Engineers and Firemen's Arbitration (1915), Proceed- 
ings, pp. 7586-7588. 

a Scott Nearing, Wages in the United States, pp. 108, 156. 



STANDARDIZATION 51 

Board (1913) relating to the establishment of 
a board of inquiry is much to the point. It 
was suggested that Congress should authorize 
a commission to examine conditions in the 
two areas, and if it were found that a higher 
wage in the West were justified the commis- 
sion should determine the amount of this 
differential. Such a board of inquiry should 
include representatives of the employers and 
the employees, and the findings should not 
be confined to the railway situation only, but 
embrace enough industries to make possible 
the definitive settlement of this phase of the 
wage problem for all employees. 

The Eastern Conductors and Trainmen's 
Board was undoubtedly justified, also, in its 
refusal to standardize rates East and West 
by the lack of agreement among the em- 
ployees in these two districts regarding na- 
tional standardization. It is natural for 
workmen in the West to desire as high wages 
as possible, and to use the increases in the 
East as a basis for their wage demands. 
Similarly, it is natural for workmen in the 
East to demand the Western rates. This 
practice, however, can only result in con- 
tinuous wage requests, with evil effects upon 
employers and employees. Before it is pos- 
sible to equalize the rates East and West, it 
is manifestly necessary for the employees in 



52 DETERMINATION OF RAILWAY WAGES 

the two districts to agree to stand for na- 
tional uniformity, and not to employ the 
"endless chain" method of obtaining in- 
creases. In the Eastern Conductors and 
Trainmen's Arbitration, Mr. Garretson stated 
that the Conductors were willing to take such 
a step; but, so far as is known, the other or- 
ganizations have not agreed to the principle 
of national standardization. 1 

If a commission of inquiry reported that 
there were no essential territorial differ- 
ences in wages between the East and West, 
and if the employees in the West accepted 
the principle of national uniformity, there 
would be no justification for an arbitration 
board to refuse the absolute equalization of 
rates East and West, except on the ground 
that mountainous districts in the West re- 
quired greater wages and that the cost of 
living varied considerably throughout the 
country. As far as possible, both in the appli- 
cation of district and national standardiza- 
tion, variations in the cost of living should be 
reflected in wages, the ideal being the equal- 
ity of real wages rather than absolute equal- 
ity. It is not likely, however, that national 
standardization will be secured until collec- 
tive bargaining is extended so as to determine 

1 Eastern Conductors and Trainmen's Arbitration (1913), Pro- 
ceedings, p. 1983. 



STANDARDIZATION 53 

in one wage movement the rates to be ap- 
plied throughout the country. When the 
district concerted movement becomes a na- 
tional concerted movement, then the forces 
which made district standardization in the 
railway industry inevitable will accomplish 
national standardization. 

The principle of national standardization 
has many advantages. Employers will be 
spared the annoyance of numerous local ad- 
justments. Employees will receive a national 
standard rate, and the power of the national 
unions will be sufficient to make this stand- 
ard an adequate one. The settlement of 
wages on a national scale will make employ- 
ees chary of presenting wage demands based 
upon trivial grounds, and the responsibility 
of those involved in the settlement of wages 
will be so great on account of the public ef- 
fect of an open breach, that resort to strikes 
will become more and more infrequent. 1 In 
spite of these advantages, however, no step can 
well be taken to further national standardiza- 
tion until a competent commission reports upon 
the similarity of conditions East and West; 
and employees throughout the country form- 
ally commit themselves to this policy, and unite 
in nation-wide concerted movements with the 
national uniformity of real wages in view. 

1 Railway Age Gazette, Vol. l, No. 16, pp. 934-935. 



CHAPTER II 

THE LIVING WAGE 

The principle of standardization has been 
one of the most effective means of wage ad- 
vance employed by the highly skilled and 
strongly organized grades of railway labor. 
The weaker railway labor organizations, how- 
ever, have been unable to cope with the roads 
by means of the concerted movement, and, 
therefore, standardization has rarely fig- 
ured in the demands of the employees out- 
side of the four train-service brotherhoods. 
In spite of this handicap, the unskilled and 
poorly organized workmen have conducted 
vigorous movements for wage advance. The 
principle upon which their wage demands 
have been chiefly based has been that of the 
living wage. 

In the treatment of w T ages, much confusion 
has resulted from the inaccurate use of such 
terms as the minimum of subsistence, the 
living wage, the normal standard of living, 
and the standard of living. At the outset, 
therefore, it will be necessary to draw a clear 
line of demarcation between these expres-/ 
sions and to set forth the meaning attached to 
them in the following pages. 



THE LIVING WAGE 55 

A wage sufficient to secure the minimum of 
subsistence is one which is capable of ob- 
taining for its recipient at the existing prices 
of commodities the bare necessities of life — 
the minimum of food, shelter, clothing, fuel 
and light — required to keep the laborer and 
his family alive. Above this minimum of 
subsistence lies what is commonly known as 
the normal standard of living, which com- 
prehends much more than the mere minimum 
of subsistence. It includes the quantity and 
quality of food consumed by the average 
laborer, sanitary living quarters, adequate 
clothing, fuel and light, and in addition, a 
provision for recreation, medical attendance, 
and a small amount of savings. The wage 
required to secure this normal standard of 
living is called the living wage. 

It has always been recognized, however, 
that in certain occupations, by reason of the 
superior skill, responsibility, and hazard in- 
volved, the laborers are entitled to compen- 
sation in excess of the amount necessary to 
secure the minimum of subsistence or the 
normal standard of living. There have thus 
developed among the whole mass of laborers 
certain strata of living standards, dependent, 
in the main, upon the size of the income and 
the prices of commodities, the state of civil- 
ization existing in the country at the partic- 



56 DETERMINATION OF RAILWAY WAGES 

ular time, the class of society to which the 
individual belongs, and his ability to distrib- 
ute the income wisely and to get the most 
out of the amount received. These strata are 
called standards of living. For each occupa- 
tion within a given industry, then, there is 
a certain, vaguely defined scale of comfort 
which each worker at that particular occupa- 
tion considers as his right. It is proper, 
therefore, to speak of the standard of living 
of the locomotive engineers as an entirely 
separate and distinct scale of comfort from 
that enjoyed by the conductors or firemen. 

With these grades of railway labor, there 
is no doubt that the wage received is con- 
siderably in excess of the living wage or of 
that required to obtain the minimum of sub- 
sistence. Among other grades of railway 
labor, however, which do not have the skill, 
risk, and responsibility of the engineers or con- 
ductors and where the wage in consequence 
is much lower, there is a conviction that the 
wage received is insufficient to secure the 
normal standard of living. These employees 
consider that standard as their right, and they 
demand increases in wages of such an amount 
as to bring their compensation to the living- 
wage level. 

By a living wage the railway employees 
imply compensation sufficient to purchase 



THE LIVING WAGE 57 

the food necessary for health and efficiency; 
to enable the employee to have his own home; 
to keep his children from working at an early 
age so that they may receive proper educa- 
tion; and to lay up a competence for his old 
age. The amount and quality of food and the 
home surroundings are to be governed by 
American standards, and not by comparison 
with foreign laborers who are accustomed to 
a lower standard of living than that of the 
average unskilled American workman. 1 Both 
in Canada and in the United States the 
lower-paid employees on the railways have 
made frequent appeals to arbitration boards 
to grant a living wage. In a number of dis- 
putes, the living wage has been the specific 
basis of the employees' demands; in others, 
this basis has been implied, since the men 
involved were already receiving compensa- 
tion equivalent to the commonly estimated 
amount of the living wage, but were demand- 
ing an increase based on the advanced cost 
of living, clearly with the purpose of keeping 
the "real" living wage intact. 

In the arbitration of 1914, involving the 
New York, Chicago, and St. Louis Railway 
("Nickel Plate") and the Telegraphers, Sig- 
nalmen, and Station Agents, the employees' 

1 Western Engineers and Firemen's Arbitration (1915), Proceed- 
ings, p. 7774; Locomotive Engineers' Magazine, June, 1912, p. 569. 



58 DETERMINATION OF RAILWAY WAGES 

representative laid particular stress upon the 
necessity of paying a living wage to the men, 
and expressed willingness to waive every 
other basis for advanced wages and to rest 
his entire argument on the principle of the 
living wage. 1 In the Wheeling and Lake 
Erie Arbitration (1914) concerning compen- 
sation of telegraphers, telephoners, signal- 
men, and station agents on three railways, 
the men argued that the minimum of $55 
monthly was inadequate and that at least 
$65 was required to obtain a decent liveli- 
hood for an employee and his family. 2 In 
Canada, the maintenance of way employees 
have been the most energetic of the lower- 
paid men in demanding increases. In 1911 
these employees conducted a successful move- 
ment on the Canadian Pacific, the Canadian 
Northern, and the Grand Trunk Pacific, 
basing their demands in each case upon the 
principle of the living wage. 3 Again in 1913- 
1914 the same grade of employees on the 
Canadian Pacific, the Canadian Northern, 
the Grand Trunk, and the Grand Trunk 
Pacific applied for further increases, the 
men's representative in the first dispute claim- 

1 "Nickel Plate" Arbitration (1914), Proceedings, pp. 129, 136. 

2 Wheeling and Lake Erie, etc., Arbitration (1914), Proceedings, 
pp. 135-141. 

3 Department of Labour (Canada), Annual Report, 1911, Ap- 
pendix, pp. 221-247, 248-254, 255-274. 



THE LIVING WAGE 59 

ing that the employees should receive a mini- 
mum wage measured by "the necessary 
amount required to live on." * In several 
Canadian cases where the roads were paying 
wages lower than in other localities, the em- 
ployees claimed that since there were no 
differences between these localities in respect 
to the cost of living, the wages should be the 
same. 2 

The number of cases in Canada in which 
the employees have specifically or impliedly 
based their demands on the principle of a 
living wage is greater than in the United 
States, 3 for in the latter, the railway arbitra- 

1 Canadian Pacific vs. Maintenance of Way Employees, Labour 
Gazette (Canada), February, 1914, p. 912; Grand Trunk Pacific 
vs. Maintenance of Way Employees, ibid., March, 1914, pp. 1055- 
1056; Grand Trunk vs. Maintenance of Way Employees, ibid., Octo- 
ber, 1913, pp. 430-442; Canadian Northern vs. Maintenance of Way 
Employees, Department of Labour (Canada), Annual Report, 
1915, Appendix, pp. 102-105. 

2 Canadian Pacific vs. Freight Handlers (1909), Department of 
Labour (Canada), Annual Report, 1910, Appendix, pp. 166-174; 
Michigan Central vs. Telegraphers, ibid., 1912, Appendix, pp. 128- 
137. 

' Other United States cases: (1910), Baltimore and Ohio South- 
western vs. Telegraphers; Southern Railway vs. Telegraphers; 
Missouri Pacific vs". Telegraphers; "Big Four" vs. Telegraphers; 
(1913), Southern Railway vs. Maintenance of Way Employees; 
(1914), Wheeling and Lake Erie, etc., vs. Telegraphers; "Nickel 
Plate" vs. Telegraphers. In Canada, the following cases may be 
cited : (1908), Grand Trunk vs. Telegraphers; Canadian Northern 
vs. Engineers; (1909), Canadian Pacific vs. Freight Handlers; Cana- 
dian Northern vs. Maintenance of Way Employees; (1911), Grand 
Trunk vs. Machinists; Canadian Northern, Canadian Pacific, and 
Grand Trunk Pacific vs. Maintenance of Way Employees; (1912), 
Canadian Pacific vs. Telegraphers and Station Agents; (1913), 



60 DETERMINATION OF RAILWAY WAGES 

tion laws apply only to those actually en- 
gaged in the movement of trains, whereas in 
Canada the Industrial Disputes Investiga- 
tion Act applies to all employees working in 
public or quasi-public utilities. In the United 
States of the lower-paid grades only the 
telegraphers, telephoners, signalmen, station 
agents, and maintenance of way employees 
have been affected by the Erdman and New- 
lands Acts; in Canada, however, in addition 
to the above grades of employment, such 
others as the freight handlers, machinists and 
shopmen, carmen, helpers, etc., have had 
their wages adjusted under the Dominion 
law, and have based their demands on the 
necessity of receiving a living wage. 

In reply to the demands of the employees 
for a living wage, the railways offer no serious 
objection. Opinion may differ as to the amount 
required to support a laborer and his family 
according to the standard which he considers 
his right, but the principle involved, namely, 
that the employee should receive a wage 
adequate to satisfy mere subsistence wants, 
plus certain conveniences and luxuries, is 
generally upheld by railway officials. The 
roads, however, have objected on two grounds 
to an increase in the compensation of low- 
Grand Trunk vs. Maintenance of Way Employees; (1914), Canadian 
Northern, Canadian Pacific, and Grand Trunk Pacific vs. Main- 
tenance of Way Employees. 



THE LIVING WAGE 61 

paid men to the standards demanded. For 
instance, in the "Nickel Plate" Arbitration 
(1914), the road contended that the wage 
paid to telegraphers and station agents was 
just and reasonable because it compared 
favorably with the amount of compensation 
received for similar work on other lines in the 
neighboring district. 1 This has been the claim 
of the employers in almost every arbitration 
in Canada and in the United States in which 
one road only has been involved. There is 
no attempt to prove that the rate paid is 
sufficient; if the road is paying the customary 
going rate in that particular neighborhood, 
it is assumed that that amount of compensa- 
tion is just and equitable. 

Another objection made to any increase 
in compensation is that, as the margin be- 
tween gross income and gross expenditures 
is already so narrow, any increase in fixed 
charges occasioned by an advance in wages 
will result either in bankruptcy or in the ne- 
cessity of applying to rate-regulating bodies 
for freight and passenger rate advances. 2 
This inability of the road to pay increases 

1 "Nickel Plate" Arbitration (1914), Proceedings, pp. 388, 393. 

2 Illinois Central Ry., etc., vs. Telegraphers (1910), Records, 
U.S. Board of Mediation and Conciliation, File No. 18; Wheeling 
and Lake Erie, etc. Arbitration (1914), Proceedings, pp. 309-310; 
"Nickel Plate" Arbitration (1914), Proceedings, pp. 385-386; 
389; 392-393; "Big Four" Arbitration (1910), Records, U.S. Board 
of Mediation and Conciliation, File No. 26. 



62 DETERMINATION OF RAILWAY WAGES 

may arise from the chronic unprofitableness 
of the particular road on account of the un- 
developed or backward state of the territory 
traversed, the necessity of large expenditures 
for upkeep due to the peculiar physical con- 
dition of the country through which the road 
passes, etc.; or from some temporary in- 
fluence, such as general business depression, 
which tends to reduce earnings and cut down 
the margin between earnings and expenses. 1 
The usual position of the railways is that, 
since they are paying customary rates, these 
are to be assumed equivalent to a living wage, 
and, provided this assumption be true, an 
increase should be refused if the road is un- 
profitable, either on account of permanent 
conditions, or by reason of general business 
depression. They admit, however, that a 
living wage should be paid. 2 

Numerous arbitration boards, both in 
Canada and in the United States, have favored 
the payment of a living wage during times of 
normal business activity without regard to 
the ability of the road to pay. In the "Nickel 
Plate" and in the Wheeling and Lake Erie 
Arbitrations (1914) the boards imposed a 

1 Canadian Northern vs. Maintenance of Way Employees (1914), 
Report, Registrar of Boards of Conciliation and Investigation, 
1915, pp. 102-105; Canadian Pacific vs. Maintenance of Way Em- 
ployees (1914), in Labour Gazette (Canada), February, 1914, p. 904. 

2 Chicago, Burlington and Quincy Arbitration (1914), Proceed- 
ings, p. 9577. 



THE LIVING WAGE 63 

minimum of $65 a month for telegraphers and 
station agents on the New York, Chicago 
and St. Louis, Wheeling and Lake Erie, 
Wabash, Pittsburgh Terminal, and West 
Side Belt Railways. 1 The telegraphers on 
the Missouri Pacific were also granted a liv- 
ing wage in 1910. 2 All the above-mentioned 
roads argued that they were unable to make 
any advances in pay, and several of them 
were in the hands of receivers at the time of 
the wage increase. In Canada, the main- 
tenance of way employees on the Grand 
Trunk Pacific, Canadian Pacific, and Cana- 
dian Northern received increases in 1911 in 
face of a vigorous statement on the part of 
the roads that their financial condition did 
not warrant any advance in wages. 3 In the 
case of the Canadian Pacific Railway against 
its telegraphers and station agents in 1912, 
the board recommended a ten per cent in- 
crease to be distributed with regard to the 
personal and family necessities of the recip- 
ient, to the location, and other advantages 
and disadvantages. The board held that the 
". . . amount of work done, the cost for 

1 "Nickel Plate" Arbitration (1914), Report of Board, p. 723. 

a Missouri Pacific Arbitration (1910), Report of Board, p. 2. 

3 Canadian Pacific vs. Maintenance of Way Employees (1911), 
Report, Registrar of Boards of Conciliation and Investigation, 1911, 
pp. 221-247; Grand Trunk Pacific vs. Maintenance of Way Em- 
ployees (1911), ibid., pp. 248-254; Canadian Northern vs. Main- 
tenance of Way Employees (1911), ibid., pp. 255-274. 



64 DETERMINATION OF RAILWAY WAGES 

house rent, etc., and the number of the recip- 
ient's family ought to govern the distribu- 
tion." 1 

In several Canadian cases, however, the 
inability of the roads to pay was permitted to 
reduce the full demands of the employees, 
although the living-wage principle was speci- 
fically recognized. The board in the dispute 
between the Canadian Northern and its en- 
gineers found that these employees were not 
receiving a living wage, and therefore au- 
thorized an increase, with the condition, 
however, that the men's demands should not 
be granted in entirety in view of the circum- 
stances of the company. 2 Again, in the set- 
tlement of the dispute between the Grand 
Trunk Railway and the telegraphers, the full 
increases demanded were not recommended, 
the board stating, however, that the right of 
the men to receive a living wage is para- 
mount. 3 

The report of the board constituted to de- 
cide upon the wages of the maintenance of 
way employees on the Southern Railway is 
particularly important because the whole 

1 Canadian Pacific vs. Telegraphers and Station Agents (1912), 
Report, Registrar of Boards of Conciliation and Investigation, 
1913, pp. 85-95. 

2 Canadian Northern vs. Engineers (1908), Department of Labour 
(Canada), Annual Report, 1909, Appendix, pp. 293-305. 

3 Grand Trunk vs. Telegraphers (1908), Department of Labour 
(Canada), Annual Report, 1909, Appendix, pp. 359-360. 



THE LIVING WAGE 65 

question of the living wage was considered 
from all possible viewpoints. The chairman 
held that eveiy workman was entitled to a 
living wage. 1 An attempt was made to com- 
pute the increase in the cost of living and in 
wages between two definite years, the re- 
sult showing that the advance in wages had 
kept pace with the advance in the costs of 
commodities and, therefore, that no increase 
in wages was due on that account. The 
board then took the railway point of view 
that the test of the adequacy of wages was 
"... a comparison with labor on other rail- 
roads where duties are the same and classi- 
fications nearly identical." 2 That is to say, 
wages on other lines were assumed to be liv- 
ing wages. The result of this comparison 
showed that six roads paid higher wages and 
five roads lower than those paid on the South- 
ern. 3 Considering the financial straits of the 
road, the board felt that it was not at liberty 
to impose the highest rates existing in the 
same territory, but only a fair average. 4 This 
average was found to be equivalent to the 
average already paid on the Southern; there- 
fore, the board felt justified in refusing an in- 
crease in wages. 5 Thus, in this arbitration, 

1 Southern Railway Arbitration (1914), Proceedings, pp. 10-11. 

2 Ibid., Report of Board, p. 14. 

8 Ibid., Report of Board, pp. 21-23. 

4 Ibid., Report of Board, p. 6. 6 Ibid., Report of Board, p. 23. 



66 DETERMINATION OF RAILWAY WAGES 

the board upheld the principle of a living 
wage, but determined the amount of that 
wage by comparison with other roads, and 
refused to increase wages on the ground of 
the inability of the Southern to pay, although 
six other roads in the territory were paying 
higher rates of compensation. 

Inability of the roads to pay on account of 
business depression as an argument against 
an increase intended to give a living wage 
found support in three recent cases in Can- 
ada. The maintenance of way employees on 
the Grand Trunk Pacific, Canadian Pacific, 
and Canadian Northern were refused an in- 
crease in the early part of 1914 on the ground 
of financial stringency pending claims for 
an advance in freight rates. 1 In the "Big 
Four" Arbitration (1910) the chairman stated 
that the rates of pay granted were not to be 
construed as giving all that the telegraphers 
might legitimately ask. "The period of de- 
pression from which business is just emerging 
and the consequent physical and financial 
conditions of the railroad have, however, 
been taken into consideration and on this 
account larger concessions have been re- 

1 Canadian Pacific vs. Maintenance of Way Employees (1914), 
Labour Gazette (Canada), February, 1914, pp. 904-912; Grand 
Trunk Pacific vs. Maintenance of Way Employees (1914), ibid., 
March, 1914, p. 1056; Canadian Northern vs. Maintenance of Way 
(1914), Report, Registrar Boards of Conciliation and Investigation, 
1915, pp. 102-105. 



THE LIVING WAGE 67 

fused." 1 Summing up the attitude of Amer- 
ican arbitration boards, it may be said that 
they favor granting a living wage to the lower 
paid and unskilled employees, with a tend- 
ency, however, especially in Canada, to rec- 
ognize the inability of the road to pay as a con- 
sequence of business depression as a proper 
ground for reducing in amount or altogether 
refusing advances in wages properly deducible 
from this principle. 

There is practical agreement nowadays 
among students of social conditions that no 
employee should receive compensation be- 
low an amount sufficient to secure a normal 
standard of living. 2 The opinion is current 
that since the result of the wage contract is 
dependent upon the relative strength of the 
two parties, and since the employees are usu- 
ally the weaker, employers should be limited 
in the exercise of their superior power by a 
provision that every wage must fulfill the 
requirements of a living wage. It is unnec- 
essary to treat here of the reasons for the 

1 "Big Four" Arbitration (1910), Records, U.S. Board of Media- 
tion and Conciliation, File No. 26. 

2 Among numerous other evidences of this may be cited the dis- 
cussion following a presentation by Professor J. B. Clark of a paper 
entitled "What Principles Should Govern the Determination of 
Wages by Arbitration Boards?" before the American Economic 
Association in 1907. The expressed opinion was almost unanimously 
in favor of a living wage (Publications of the American Economic 
Association, 3d Series, Vol. vin, No. 1, pp. 29-53). 



68 DETERMINATION OF RAILWAY WAGES 

payment of a living wage. The evil effects 
upon society and upon the laborer himself 
arising from the failure to receive such a 
wage are patent. Undoubtedly a living wage 
is a necessity; the real issue is whether it is 
possible to determine the essentials consti- 
tuting a normal standard of living, and 
whether the amount of money required to 
purchase these essentials can be calculated 
within reasonably exact limits. 

Recent investigations concerning the es- 
sentials properly constituting the normal 
standard of living show virtual unanimity of 
opinion. In addition to food in such quantity 
and of such quality as the average American 
laborer consumes, living quarters with sani- 
tary conveniences, and large enough to meet 
the requirements of morality, clothing, warm 
and of good appearance, and the necessary 
fuel and light, the normal standard includes 
a provision for a small amount of recreation, 
for medical attendance, and for a sum of 
money to be utilized to tide over short periods 
of unemployment and to provide for life 
insurance and membership in some benefit 
society. 1 The above essentials are based on 
the needs of a family of five, consisting of a 
man and wife, and three dependent children. 

1 E. T. Devine, Principles of Relief , pp. 29-36; L. B. More, Wage- 
Earners' Budgets, pp. 269-270; R. C. Chapin, Standard of Living 
among Workingmen's Families in New York City, pp. 75-198. 



THE LIVING WAGE 69 

Such is the estimation of the essentials in a 
normal standard of living agreed upon by 
economists and social investigators, and put 
into practice in the administration of the 
Australasian arbitration and wages boards. 1 
The practicability of determining the 
amount of compensation necessary to secure 
this normal standard in the United States has 
been established by Chapin, More, Nearing, 
Streightoff, and by investigations undertaken 
by the United States Bureau of Labor Sta- 
tistics, and by various state labor bureaus. 
Variations appear, it is true, but these are 
due to differences in locality or in the period 
of the investigations, living costs varying 
considerably from time to time and from 
place to place. For New York City Chapin 
estimated that the above essentials could be 
obtained for a yearly expenditure of $900; 2 
More put the figure at from $800 to $900. 3 
Dr. Devine concluded that unless a family 
of five in New York City in about the year 
1905 received at least $600 a year, it would 
inevitably become dependent, 4 and for the 
United States at large Streightoff estimated 
that a family living wage in the cities should 

1 Economic Journal, Vol. xxv, No. 99, p. 323; Harvard Law Re- 
view, Vol. xxex, No. 1, pp. 14-15; Aves, Wages Boards, Appendix, 
pp. 216-217; Bulletin, U.S. Bureau of Labor Statistics, No. 167, 
pp. 9, 146, 165, 167. 

2 Chapin, pp. 245-250. 3 More, pp. 269-270. 4 Devine, p. 35. 



70 DETERMINATION OF RAILWAY WAGES 

average $650. x These various determina- 
tions, based on careful investigation, give 
evidence that it is possible in general terms 
to arrive at a sufficiently exact calculation of 
the normal standard of living and of the wage 
necessary to secure that standard. 

In view of the evident possibility of deter- 
mining the amount of a living wage, it seems 
that arbitration boards in applying the princi- 
ples of a living wage should be governed in 
their findings by reference to such results as 
those obtained by More and Chapin. In- 
stead, however, recourse has been had to such 
expedients as those illustrated in the sum- 
mary of the reasoning of the board in the 
Southern Railway Arbitration given above. 2 
It is not valid to assume that the average rate 
paid to unskilled men on neighboring lines 
is necessarily a living wage. Wage compari- 
sons as between different roads are proper 
when the principle of standardization is in- 
volved. In that case, the desire is to estab- 
lish a uniform rate on all roads within a given 
territory, and for this purpose, a comparison 
is required so that compensation on those 
roads paying low wages may be raised to the 
average, going, standard rate of the district. 
The issue is primarily uniformity. In the 

1 F. H. Streightoff, Standard of Living, p. 162. 

2 See above, p. 65. 



THE LIVING WAGE 71 

application of the living wage principle, 
however, the issue is adequacy of wages — 
the amount of the wage required to main- 
tain a predetermined normal standard of liv- 
ing. If it be decided to base wages of tele- 
graphers or maintenance of way employees 
on the principle of a living wage, then a de- 
termination of their compensation can never 
be based fairly on a comparison with the 
wages paid the same grades of employment 
on other lines. The sole measure of a living 
wage is the amount of money required at a 
given time and at a given place to secure for 
an employee, assuming that he is married 
and has a certain number of dependent chil- 
dren, a normal standard of living. This 
standard and the compensation necessary 
to obtain it have been determined for cer- 
tain localities, and it is possible, by taking 
account of differences in the cost of food, rent, 
clothing, etc., between these localities and 
the one concerned in the particular arbitra- 
tion, or by referring to the general average 
of the living wage for the entire country, to 
calculate a reasonably exact approximation 
of the living wage for the employees involved. 
One of the important problems confronting 
railway arbitration boards has been the ques- 
tion of the influence which the inability of 
the road to pay should have upon demands for 



72 DETERMINATION OF RAILWAY WAGES 

wage advance based on the principle of the 
living wage, when such inability arises from 
some cause other than business depression. 
In Australasia the practice, in so far as liv- 
ing wages are concerned, has been to dis- 
regard the financial condition of the employer. 
The following quotation from a speech in the 
Legislative Council of New Zealand is fairly 
typical of the attitude of the members of arbi- 
tration and wages boards. After upholding 
the principle of paying a living wage, the 
speaker said: "And if a trade cannot be car- 
ried on so as to give the worker such a wage 
as to enable him to work at that trade and 
enable those who are dependent on him to 
live in decency, we do not want that trade, 
because there are in this country other trades 
still left in which a competent man can be 
paid such wages as will keep him from deg- 
radation and maintain him in that position 
in which we, as civilized people, wish to see 
our workers as a whole." * In considering the 
effect of inability to pay upon the standardi- 
zation of wages, the conclusion reached, based 
upon the practice in the United States, and 
upon the evident advantages of standardiza- 
tion, was that the unprofitableness of indi- 
vidual roads should not militate against the 
application of that principle. The employees 

1 Aves, Appendix, p. 216. 



THE LIVING WAGE 73 

concerned with standardization receive a 
wage far in excess of that required to secure 
the normal standard of living, and if arbitra- 
tion boards in the United States have univer- 
sally refused to allow unprofitable roads to 
pay less than the standard to these employ- 
ees, they should not permit any business, no 
matter what its financial condition, to pay 
less than the full living wage to men whose 
compensation is close to the minimum of 
subsistence. A living wage to the lowest paid 
men is paramount and takes precedence over 
every other charge on the industry. If need 
be, prices should be raised in order to permit 
the business to pay a living wage to its un- 
skilled and lowest paid employees. 

When inability to pay arises out of gen- 
eral business depression, arbitration boards 
face an additional problem — not only a 
decision as to whether wages should be in- 
creased on the principle of a living wage dur- 
ing periods of depression, but also whether 
reductions in the wages of the lowest paid 
men should be allowed at such times. In- 
creases based on the living wage principle 
should be granted always regardless of the 
condition of any particular business, or of 
business in general. The payment of a living 
wage is paramount, the first charge on the 
industry. During periods of business de- 



74 DETERMINATION OF RAILWAY WAGES 

pression, it is likely that the prices of the 
commodity sold by the employer are low and 
that his margin of profit is exceedingly nar- 
row in spite of the reduction of his business 
costs to the lowest possible amount. An in- 
crease in the wage bill may force the em- 
ployer out of business if he has exhausted 
every expedient for reducing his cost. For 
this reason, employees should present wage 
demands only during periods of normal busi- 
ness activity or of intense prosperity. If they 
fail to have regard to these more opportune 
times for demanding wage increases, how- 
ever, arbitration boards, nevertheless, should 
grant the advance required to bring existing 
compensation to the living wage level, for 
employees are entitled at all times to a normal 
standard of living. 

The question of allowing reductions in 
wages during periods of business depression 
came to the fore in the crisis of 1907. Labor 
leaders at that time held that the working 
classes were in no way responsible for the 
depressed condition of business, and there- 
fore, employees should not be forced to suf- 
fer for the faults of others. 1 Again, it was 
argued that wage reductions tend to accen- 
tuate depression, for they compel retrench- 
ment in household economy, thus curtailing 

1 American Federationist, February, 1908, p. 107. 



THE LIVING WAGE 75 

consuming power and lessening demand. 1 
These arguments are not sufficiently con- 
vincing to form a basis for disallowing re- 
ductions during periods of business depres- 
sion. It is probable that the ups and downs 
of prosperity, crisis, and depression will be 
leveled off in the course of time, but at pres- 
ent arbitration boards must work on the 
assumption that recurring depressions in the 
field of business are normal phenomena. The 
studies of Professor W. C. Mitchell demon- 
strate that depression sets in motion certain 
processes of readjustment by which a return 
to business prosperity is made possible. Thus, 
low selling prices of their products force 
managers to exercise the closest economy and 
the most skillful organization of the plant in 
order to obtain profits, or even to maintain 
the solvency of the business. Costs are re- 
duced to the minimum by this economical 
management, by the reduced prices of raw 
materials, and by the lessened labor cost 
due to the discharge of the more incompetent 
employees and the retention of the efficient. 2 
Any check to these processes of readjust- 
ment will seriously hinder the return of busi- 
ness prosperity. 

A reduction in wages, it is true, will still 

1 American Federationist, December, 1906, p. 977; June, 1907, 
p. 413; February, 1908, p. 107. 

2 W. C. Mitchell, Business Cycles, pp. 578-579. 



76 DETERMINATION OF RAILWAY WAGES 

further lower labor costs, but the possibility 
of a reduction in this item will tend to cause 
business managers to neglect economies which 
may be effected in other directions without 
lowering the standard of living of a class of 
labor already extremely low in the scale. 
Furthermore, the efficiency of labor, which is 
increased during periods of depression on 
account of the retention of more competent 
employees, will be decreased by a reduction 
in wages. Thus, although a wage reduction 
will decrease labor costs and in that respect 
hasten the expansion of business after a 
period of depression, the same reduction will 
probably more than counteract the process 
of readjustment by checking the tendency 
of business managers to introduce economies 
in costs other than labor, and by decreasing 
the efficiency of the employees. In addition, 
it may be argued that, since the wages of un- 
skilled labor tend to fall off during periods 
of depression more rapidly than the wages 
of skilled employees, this tendency should be 
checked, because, from the standpoint of the 
living wage, skilled laborers are better able 
to bear a reduction than unskilled laborers. 
For these reasons, therefore, reductions in the 
wages of low-paid men during periods of 
business depression should be disallowed. 



CHAPTER III 

THE INCREASED COST OF LIVING 

During the past ten years, railway em- 
ployees in the United States and Canada 
have appealed frequently to the increasing 
cost of living, as a basis of wage advance. In 
numerous disputes settled under the provi- 
sions of the Erdman and Newlands Acts and 
under the Canadian Industrial Disputes In- 
vestigation Act, the employees have argued 
that the general advance in the prices of com- 
modities and the consequent loss in pur- 
chasing power operated as a reduction in 
wages, and therefore an increase in wages 
equivalent to the advance in prices was im- 
perative. The reasons for the use of increased 
living costs as a principle of wage advance 
are not far to seek. For nearly a quarter of a 
century the "high cost of living" has been a 
catch phrase upon the lips of every house- 
keeper; newspapers and magazines have del- 
uged the public with the whys and where- 
fores of it; various government commissions 
have investigated and reported; indeed, few 
public questions at the present day equal in 
general interest the high cost of living. The 
pronounced advance in the prices of those 



78 DETERMINATION OF RAILWAY WAGES 

commodities which constitute the chief ob- 
jects of consumption in workingmen's fami- 
lies is one of the most striking features of the 
general economic situation to-day. We know, 
too, that this upward tendency of prices is 
not confined to any one country, but that the 
rise in prices of food, rent, clothing, fuel, and 
light is practically world-wide. 1 In North 
America, however, and particularly in the 
United States, the advance in recent years 
has been unprecedented. Statistics of food 
prices collected by the United States Bureau 
of Labor Statistics show that from 1907 to 
1914, retail prices of food consumed by the 
average workingman's family advanced about 
24.5 per cent. 2 The increases in fuel prices 
from 1907 to 1914 ranged from 6.9 to 9.7 
per cent. 3 Other authorities agree in plac- 
ing the rise of rents at 10 to 20 per cent. 4 
This rise in the cost of living affects the well- 
being of every class, especially those depend- 
ent upon a fixed income. The publicity given 
to the increasing cost of living, and its almost 
universal effect, therefore, have led railway 
employees to put forward this basis, confident 

1 Select Committee of the Senate on Wages and Prices of Com- 
modities, 61st Cong., 3d Sess., Vol. I, pp. 8-10. 

2 Bulletin, U.S. Bureau of Labor Statistics, No. 156, p. 9. 

3 Ibid., p. 24. 

4 Devine, Principles of Relief, p. 36; More, Wage Earners' Budg- 
ets, p. 32; Department of Labour (Canada), "Wholesale Prices 
in Canada, 1913," p. 257. 



THE INCREASED COST OF LIVING 79 

that their demands would receive attentive 
consideration from arbitrators and concilia- 
tors who, in all likelihood, were affected by 
this same increase in the cost of living. 

Again, the general impression to-day is that 
wages of the employed class as a whole have 
not kept pace with the rapid advance in the 
prices of commodities. The Senate Commit- 
tee of 1910 reported that wages had not ad- 
vanced as rapidly as prices, 1 and the Mas- 
sachusetts Commission of the same year came 
to a similar conclusion. 2 Dr. I. M. Rubinow 
in a recent article said, "The American wage- 
worker, confronted with a rapidly rising price 
movement has been losing ground surely and 
not even slowly, so that the sum total of 
economic progress of this country for the last 
quarter of a century appears to be a loss of 
from 10 to 15 per cent in his earning power." 3 
The statistics of the United States Bureau of 
Labor show a tendency in wages to lag be- 
hind prices, but not to the extent claimed by 
Rubinow. 4 Reports by special committees, 
the verdict of economists, and the results of 
statistical investigation are almost one in the 
conclusion that the purchasing power of the 

1 Select Committee of the Senate, 61st Cong., 3d Sess., Vol. i, 
p. 52. 

2 Report of Massachusetts Commission on the Cost of Living 
(1910), pp. 88-89. 

3 American Economic Review, December, 1914, p. 813. 

4 Bulletin, U.S. Bureau of Labor, No. 77, pp. 1-11. 



80 DETERMINATION OF RAILWAY WAGES 

workman's wage has tended downward dur- 
ing the past decade. The leaders of railway 
labor have been alive to the impression pro- 
duced by the conclusions stated above, and 
they have claimed that railway employees 
are in the same position in respect to wages as 
employees in other industries. Thus, the dis- 
proportionate rise in wages of workmen in 
general in comparison with the advance in 
prices has constituted another factor favor- 
ing the use of the increased cost of living as a 
basis of wage demands by the railway em- 
ployees. 

For these reasons, then, the increased cost 
of living principle has found its place in the 
employees' briefs in almost every railway 
arbitration in Canada and in the United 
States. But apart from these, this basis of the 
employees' demands goes far deeper and 
finds its origin in one of the oldest and most 
stubbornly maintained doctrines of unionism. 
This Sidney and Beatrice Webb have called 
the "Doctrine of Vested Interests." The 
objects of the paragraphs immediately fol- 
lowing will be to examine the relation of this 
doctrine to the cost of living, and to give 
some idea of the attitude of American rail- 
way labor toward it. 

By the doctrine of vested interests is meant 
the belief that the wages ". . . hitherto en- 



THE INCREASED COST OF LIVING 81 

joyed by any section of workmen ought under 
no circumstances to be interfered with for the 
worse." 1 In other words, the standard of 
living must be maintained at any cost. The 
standard of living, however, is an indefinite 
and much misunderstood phrase. It is a 
complex of so many factors that in order to 
determine its exact relation to the cost of 
living, it will be necessary to analyze the 
term into its component parts. The standard 
of living of any given class of people may be 
defined as the scale of comfort which any 
individual or family instinctively sets as in- 
dispensable to its moral, mental, and phys- 
ical development. It is a resultant of two 
general forces, environment and individ- 
uality. 2 Thus, such factors as the state of 
civilization, the class of society to which the 
individual or family belongs, the place of 
residence, the size of the family, the number 
of wage-earners in the family, and the char- 
acter of their occupations, and the amount of 
income — all these, together with the ideals, 
ambitions, and the capacity for wisely spend- 
ing the income act upon each other to de- 
termine the standard. Reduced to its sim- 
plest terms, however, the standard of living 
may be said to depend upon four factors : the 

1 Webb, Industrial Democracy (1902 ed.), p. 562. 

2 Streightoff, pp. 3-4. 



82 DETERMINATION OF RAILWAY WAGES 

state of civilization, the class of society, the 
income, and the personal factor. As civiliza- 
tion advances and becomes more complex, 
"there is a constant, though irregular rise of 
the standard of living." x Numerous com- 
modities which many years ago were re- 
garded as luxuries are now brought within 
the reach of every one. Few homes now lack 
modern sanitary conveniences; clothes of 
better quality and more fashionable style 
can be purchased at reasonable prices; the 
opportunities for amusement, such as mov- 
ing picture shows, have increased ; and, taken 
all in all, the general advance in civilization 
has served as a potent factor in bettering the 
condition of the great body of people. 

The class of society to which an individual 
belongs affects his standard of living. The 
college professor whose salary, perhaps, is 
less than that of a locomotive engineer, 
maintains a much higher standard of living 
owing to the requirements of his calling and 
to his associations. The size of the income 
limits the ability of the individual both to 
realize his ambitions and ideals, and to pur- 
chase those commodities and services which 
he regards as necessary to his welfare. The 
personal factor as a determinant of the stand- 
ard of living has received much attention 

1 Streightoff, p. 4. 



THE INCREASED COST OF LIVING 83 

from recent writers and investigators. It 
has been claimed that the standard of living 
depends more upon the degree of judgment 
exercised in the expenditure of the income 
than upon any other single factor. The re- 
sults of recent investigations, however, prove 
the contrary. The Chapin report on the stand- 
ard of living in New York City states that 
the personal factor does operate in every 
family, as regards the habits of the father 
and the managing ability of the mother, but 
there are limits to what can be done by thrift 
and economy; for example, decent housing 
cannot be obtained below a certain figure, 
health cannot be maintained on bread and 
tea, and in spite of skillful mending, shoes and 
coats will wear out. 1 Investigation seems to 
show that the income is the chief determi- 
nant of the standard of living. Thus Chapin 
says, "The actual standard ... is set prima- 
rily ... by the wages paid and the prices 
charged." 2 Similarly, More states, "From 
an economic standpoint . . . the amount of 
income is the most important factor in de- 
termining the standard of comfort attainable 
in an average workingman's family." 3 

If it be granted that the income is the chief 
determinant of the standard of living, then 

1 Chapin, pp. 249-250. 2 Ibid., p. 250. 

8 More, p. 270; Nearing, The Adequacy of American Wages, p. 2. 



84 DETERMINATION OF RAILWAY WAGES 

any reduction in money wages unattended 
by a corresponding reduction in prices, or 
any reduction in real wages as a consequence 
of an upward price tendency will, of course, 
operate against the doctrine of vested in- 
terests. It was argued in the Chicago, Bur- 
lington and Quincy Arbitration (1914) that 
as a result of the increased cost of living, the 
purchasing power of the wages of the em- 
ployees had declined "resulting in a lower 
standard of living, a sacrifice of comfort, a 
denial of better education for the children of 
workingmen, and withal a discontent which 
tends to reduce efficiency, to the detriment 
of both the employer and the employee." * 
The railway arbitrations, both in Canada 
and in the United States, in which this same 
statement has been made in various forms, 
are too numerous to set forth here. 2 In the 

1 Chicago, Burlington and Quincy Arbitration (1914), Proceed- 
ings, pp. 58-59. 

2 Among the arbitrations in the United States in which the em- 
ployees have brought forward the increased cost of living argument 
are: Chicago Switchmen's Arbitration (1910); Denver and Rio 
Grande Arbitration (1910); Western Firemen and Enginemen (1910); 
Missouri Pacific Arbitration (1910); "Big Four" Arbitration (1910); 
Eastern Conductors and Trainmen's Arbitration (1913); Southern 
Railway Arbitration (1913); Chicago and Western Indiana, Belt 
Railway Co. Arbitration (1913); Wheeling and Lake Erie, etc., 
Arbitration (1914); "Nickel Plate" Arbitration (1914); Western 
Engineers and Firemen's Arbitration (1915). In Canada the fol- 
lowing may be cited: Canadian Northern vs. Engineers (1908); 
Canadian Northern vs. Maintenance of Way Employees (1909); 
Grand Trunk vs. Machinists (1911); Canadian Pacific vs. Main- 
tenance of Way Employees (1911); Canadian Northern vs. Main- 



THE INCREASED COST OF LIVING 85 

Eastern Firemen's Arbitration (1913), Presi- 
dent W. S. Carter of the Brotherhood of 
Enginemen and Firemen said, "I say this 
general upward trend of the cost of living, or 
rather the downward trend of the purchasing 
power of money, is one of the most impor- 
tant things to be considered in wage matters." 1 
Railway employees are being constantly 
reminded that the only means of maintain- 
ing their standard of living in view of steadily 
advancing prices is to demand a correspond- 
ing increase in wages. The publications of 
the railway brotherhoods make frequent ref- 
erence to the necessity of the maintenance of 
the standard of living, and one asserts that 
" there is a great work to be done by the rail- 
road labor organizations before the pay of 
railroad employees bears the same proportion 
to the cost of living now that their wages did 
ten years ago." 2 Another, quoting the men's 
counsel in the Georgia Railway Strike in 
1910, states that it is useless to blame the 
trusts and the tariff and to attempt to reduce 
prices. The public is in sympathy with the 
brotherhoods, and the course for the men to 

tenance of Way Employees (1911) ; Grand Trunk Pacific vs. Main- 
tenance of Way Employees (1911); Canadian Pacific vs. Telegra- 
phers (1912); Michigan Central vs. Telegraphers and Station Agents 
(1912). 

1 Eastern Firemen's Arbitration (1913), Proceedings, p. 2432. 

2 Locomotive Firemen and Enginemen s Magazine, September, 
1910, p. 401. 



86 DETERMINATION OF RAILWAY WAGES 

pursue is to make demands for substantial 
and drastic wage advance. 1 The policy of the 
railway brotherhoods, then, in the convic- 
tion that wages have not moved on a line 
parallel with the increasing cost of living, is 
to force wage concessions from the railways, 
until the percentage increase in wages through 
a term of years is equal to the percentage 
increase in the cost of commodities. In this 
way only, they claim, can the standard of 
living be maintained. 

The position of the railways in regard to 
the merits of the increased cost of living as a 
basis for wage advances is somewhat diffi- 
cult to define. With them it is more a ques- 
tion of fact than of principle. In general it 
may be said that the employers hold that the 
various wage increases between two definite 
years have taken into account the advances 
in the cost of living for that period. In the 
Eastern Conductors and Trainmen's Arbi- 
tration (1913) the roads maintained that the 
Clark-Morrissey Award of 1910 should be 
the starting-point in determining the ad- 
vance in wages, and that since 1910 there 
had been no change in living costs to warrant 
an increase in wages. 2 This same position 

1 Locomotive Firemen and Enginemeris Magazine, March, 1910, 
pp. 397-398. 

2 Eastern Conductors and Trainmen's Arbitration (1913), Rail- 
ways' Reply Brief, p. 7; Report of Board, p. 68. 



THE INCREASED COST OF LIVING 87 

was taken by the railways in the Eastern 
Engineers' (1912) and the Western Engi- 
neers' and Firemen's Arbitrations (1915). * 
Thus, the railways question the facts in the 
men's claims, without admitting or denying 
the justice or injustice of a wage demand 
based upon the maintenance of the standard 
of living. Elisha Lee, Chairman of the Con- 
ference Committee of Managers in the East- 
ern Conductors and Trainmen's Arbitra- 
tion (1913), stated perhaps more clearly than 
any one else the attitude of the railways to- 
ward the principle of the maintenance of the 
standard of living. He said: "It is an attrac- 
tive thought that a wage should be based 
upon an estimated standard of what is re- 
quired for a healthy life. But such an ideal 
is hopelessly impracticable of application. . . . 
Must we not in the final analysis face the 
fact that wages are a payment for a service 
rendered, and that it is neither just nor 
practicable to force employers to pay, not 
according to the value of the service, but 
according to the workman's standard of his 
own needs?" 2 Railway officials, however, 
are not agreed as to the rejection of the 
employees' arguments, for President W. C. 

1 See also "Nickel Plate" Arbitration (1914), Proceedings, p. 135; 
Southern Railway Arbitration (1913), Report of Board, p. 1. 

2 Eastern Conductors and Trainmen's Arbitration (1913), Pro- 
ceedings, p. 2054. 



88 DETERMINATION OF RAILWAY WAGES 

Brown, of the New York Central, stated in 
1910, during the proceedings of the Clark- 
Morrissey Arbitration, that "it may be laid 
down as a sound business principle that 
further advances should only be made when, 
and in such amount as shall be necessary 
to meet the increased cost of living." l The 
railways' position, then, in regard to the 
principle involved in the increased cost of 
living as a wage basis is uncertain, but as 
to the question of fact, their contention is 
definite that the compensation of employee 
has increased in equal or greater proportion 
than have the prices of commodities, and, 
therefore, no wage advances are justifiable 
on that basis. 

Apart, however, from their view as to the 
merits of the principle itself, the railways 
maintain that the application of the prin- 
ciple of the increased cost of living is at- 
tended by serious drawbacks which militate 
against its value as a basis for wage advances. 
In the first place, objection is made on the 
ground that in estimating the cost of living, 
food prices only are considered and that food 
represents from thirty-five to fifty per cent 
of the total expenditures of families earning 
from $200 to $1200 a year. For instance, 

1 Eastern Conductors and Trainmen's Arbitration (1913), Quoted 
in Employees' Brief, p. 23. 



THE INCREASED COST OF LIVING 89 

in the Eastern Conductors and Trainmen's 
Arbitration (1913) the railway representa- 
tives claimed that, as food expenditure in a 
conductor's family represented only about 
forty per cent of the total expenditure, the 
13.4 per cent increase in the cost of products 
claimed by the men amounted to about a 
5.3 per cent increase in the total cost of liv- 
ing. 1 For this reason, and also because the 
personal element plays such an important 
part in determining the expenditures of a 
family, the railways maintain that the cost 
of living is incapable of accurate statistical 
expression, and that it is, therefore, impos- 
sible to determine the true rate of increase. 
As a further argument against the increase of 
wages on the basis of the advanced cost of 
living, the roads claim that although their 
"cost of living," too, is much higher on ac- 
count of increases in wages, taxes, expendi- 
tures for improvements and materials, yet 
they are allowed no means of increasing their 
income. They are asked to meet every ad- 
vance in the cost of living of their employees, 
to which advance they add nothing, and yet 
they are denied the privilege enjoyed by every 
other employer of labor of adding increased 
costs to the price of their only commodity or 

1 Eastern Conductors and Trainmen's Arbitration (1913), Rail- 
ways' Reply Brief, p. 7; Report of Board, p. 68. 



90 DETERMINATION OF RAILWAY WAGES 

service — transportation. 1 The railways as- 
sert that their advancing expenditures have 
forced them, in spite of the economies inci- 
dent to more efficient management, to re- 
quest advances in rates in order to make 
both ends meet. Thus the roads maintain 
that they are practically in the same position 
as the employees in regard to the increased 
cost of living, and that any increase in their 
cost of living by an advance in wages will, 
sooner or later, be reflected in the higher rates 
which the public will have to pay. 2 

The attitude of the employees and of the 
railways toward the increased cost of living as a 
principle governing wage advances has been 
discussed ; it now remains to consider the posi- 
tion taken by the railway arbitration boards 
in Canada and in the United States. It is 
sometimes impossible to ascertain upon what 
basis a certain increase has been granted, 
for arbitration boards frequently report only 
the increases in absolute amounts or in per- 
centages and make no comment as to the 
principles underlying their awards. There is 
a possibility that the arbitrators have been 
unable to find any principle which should 
govern wages and have therefore resorted to 
a compromise, or that such reasons as may 

1 The Railway Library, 1909, pp. 334-335; Western Firemen and 
Enginemen's Arbitration (1910), Proceedings, p. 2918. 

2 Eastern Firemen's Arbitration (1913), Proceedings, p. 2481. 



THE INCREASED COST OF LIVING 91 

have influenced them are incapable of with- 
standing the vehement criticisms of the side 
which considers itself the loser, and therefore 
out of caution are not set down in the award. 
Whatever the cause of this dearth of com- 
ment, it seems desirable that the boards 
should, in the interest of future arbitrations, 
describe the reasoning by which the con- 
clusion has been reached, and thus build up 
a line of decisions, which, if not to be re- 
garded as absolute and binding precedents, 
may at least serve as valuable guides in wage 
controversies of the future. Fortunately, 
some of the boards have set forth minutely 
the principles governing their wage awards, 
and this has been the case particularly in 
the large concerted movements of recent 
years. 

In the East, the principle of standardization 
has been regarded by the men as of greatest 
importance * and increased cost of living as 
a basis has in consequence been less empha- 
sized, the Eastern Engineers in 1912 omit- 
ting it altogether from their brief. 2 With this 
exception, however, it may be said that the 
increased cost of living has held the chief 
place in the employees' arguments; and it 
may therefore be assumed, in the absence 

1 F. H. Dixon, "Public Regulation of Railway Wages," Pro- 
ceedings American Economic Association, 1914, Vol. xxvn, p. 251. 

2 Eastern Engineers' Arbitration (1912), Proceedings, p. 11. 



m DETERMINATION OF RAILWAY WAGES 

of any statements of arbitration boards sup- 
porting another principle, that the recent 
wage advances to railway employees have 
been largely based upon the increased cost of 
living. It is impracticable to enumerate here 
all the cases in which this principle has been 
employed, expressly or implicitly, as the 
basis of wage advances; only a few will be 
mentioned. 1 

In 1910 railway employees in all sections 
of the United States received wage advances 
by arbitration based upon the increased cost 
of living. In March the switchmen employed 
on thirteen roads having terminals in Chi- 
cago received a ten per cent advance, 2 and 
this award was followed by a wage increase 
granted to the telegraphers on the "Big 
Four." 3 The engineers and firemen, in a con- 
certed movement involving fifty -two West- 
ern railways, next obtained increases in wages 

1 Among the railway arbitration awards which have been gov- 
erned partly by the increased cost of living, and which are not 
mentioned above are: in the United States: Southern Railway vs. 
Maintenance of Way Employees (1913); Chicago and Western 
Indiana and Belt Railway Company of Chicago (1913); Wheel- 
ing and Lake Erie, Wabash, Pittsburgh Terminal, West Side Belt 
Railway (1914); Chicago, Burlington and Quincy (1914); "Nickel 
Plate" Arbitration (1914); in Canada: Grand Trunk Railway vs. 
Machinists (1911); Canadian Pacific vs. Telegraphers (1912); Mich- 
igan Central vs. Telegraphers (1912); Canadian Northern vs. Con- 
ductors (1913). 

2 Switchmen's Arbitration (1910) ; Records, U.S. Board of Media- 
tion and Conciliation, File No. 25. 

3 "Big Four" Arbitration (1910), ibid., File No. 26. 



THE INCREASED COST OF LIVING 93 

of from ten to twelve per cent, 1 and later in 
the year the same classes of employees on 
the Denver and Rio Grande Railroad re- 
ceived advances by an award under the Erd- 
man Act. 2 In June and July, 1910, the te- 
legraphers on the Southern Railway 3 and on 
the Missouri Pacific 4 were granted increased 
wages, although the amount obtained by 
these awards did not fully meet the increased 
cost of living. In the East, the wages of con- 
ductors and trainmen were advanced by the 
Clark-Morrissey Arbitration involving the 
New York Central employees, 5 this board 
reporting that a new basis of living and liv- 
ing costs had been reached which called for 
substantial increases to these employees. As 
a result of this award, of the Baltimore and 
Ohio Mediation, and of a concerted move- 
ment of the conductors and trainmen on the 
other railways, increased rates for this class 
of employees were put in force on all roads 
in the Eastern District. 6 In 1913, the con- 
ductors and trainmen in the East received 

1 Western Firemen and Enginemen's Arbitration (1910), ibid., 
File No. 29. 

2 Denver and Rio Grande Arbitration (1910), ibid., File No. 
39. 

8 Southern Railway Arbitration (1910), ibid., File No. SO. 

4 Missouri Pacific Arbitration (1910), ibid., File No. 33. 

6 Railway Age Gazette, Vol. xlviii, No. 19, p. 1220. 

6 Cunningham "Standardization of Wages of Railroad Train- 
men," Quarterly Journal of Economics, November, 1910, pp. 139- 
160. 



94 DETERMINATION OF RAILWAY WAGES 

a seven per cent advance, the board stating 
that it did not base its action entirely on the 
increased cost of living, although it regarded 
that principle as basic. 1 

In Canada, almost without exception, the 
Boards of Conciliation and Investigation 
appointed under the Industrial Disputes 
Investigation Act have recognized the prin- 
ciple of the increased cost of living as a basis 
for wage advances. In 1908, the board in the 
dispute between the Canadian Northern 
Railway and its engineers found that the em- 
ployees were not paid enough to meet the 
necessities of life in view of the increased cost 
of living, and therefore recommended an ad- 
vance in wages. 2 In the following year the 
same railroad threatened a reduction in the 
wages of its maintenance of way employees, 
but the board recommended, on account of 
the increased cost of living, that no reduction 
be allowed. 3 In 1914, the same employees 
demanded increased wages on the Canadian 
Northern, but the board, although recogniz- 
ing the principle involved, refused to recom- 
mend the rates requested, as increases in 
living costs did not warrant such large ad- 

1 Eastern Conductors and Trainmen's Arbitration (1913), Re- 
port of Board, p. 34. 

2 Report, Department of Labour (Canada), 1909, Appendix, 
p. 298. 

3 Ibid., 1910, Appendix, pp. 141-152. 



THE INCREASED COST OF LIVING 95 

vances. 1 In 1911, the maintenance of way 
employees on the Canadian Pacific Railway 
received an advance in wages based on the 
increased cost of living, 2 and the same em- 
ployees on the Canadian Northern 3 and the 
Grand Trunk Pacific 4 obtained a similar 
advance in the same year, the boards being 
nearly the same as in the Canadian Pacific 
case. As a general proposition, it may be 
said that both in Canada and in the United 
States, arbitration boards have recognized 
the increased cost of living as a basis of wage 
advance. Thus, the Doctrine of Vested In- 
terests is upheld, not only by the railway 
brotherhoods, but by the opinion of those 
actually confronted with the problem of find- 
ing a basis for the determination of wage ad- 
vances. 

The importance of maintaining the stand- 
ard of living, both from the viewpoint of the 
employees particularly involved and of so- 
ciety at large, has been recognized and urged 
by economists. The opinion generally held 
is that the lower the standard of living of the 
people of any nation, the less their physical, 
economic, social, and moral well-being. 5 It 

1 Report, Registrar of Boards of Conciliation and Investigation, 
1915, pp. 102-105. 

2 Ibid., 1911, pp. 221-247. 

3 Ibid., pp. 255-274. 4 Ibid., pp. 248-254. 

5 Report of Massachusetts Commission on the Cost of Living, 
1910, pp. 523-525. 



96 DETERMINATION OF RAILWAY WAGES 

has been maintained with some justification 
that the superiority of the American laborer 
is due in the main to the fact that he is bet- 
ter fed, clothed, and housed than workmen 
in other countries. To lower this standard of 
living will unquestionably affect the laborer's 
productivity for the worse. A reduction in 
the standard, also, will endanger the stabil- 
ity of relations existing between employers 
and employees; one has only to turn to the 
numerous attempts of employers during the 
business depression of 1907 to reduce wages 
and the consequent attitude of labor to find 
sufficient proof of the correctness of this 
assertion. The lessening of national produc- 
tiveness, the danger of industrial disturb- 
ances, and the physical and moral deteriora- 
tion sure to follow from a reduction in the 
standard of living will affect every class of 
society, and therefore, the importance of at 
least maintaining the standard at its present 
level can hardly be overestimated. The rail- 
way brotherhoods, as well as other labor or- 
ganizations, aim not only to maintain, but to 
improve the standard of living, and this policy 
should be regarded as one of the strongest 
forces making for the future development of 
the country — a policy, in the interest of 
the public welfare, to be encouraged and 
fostered by every possible means. 



THE INCREASED COST OF LIVING 97 

If it be admitted that the maintenance of 
the standard of living is socially expedient, it 
follows that any principle of wage advance 
which serves to keep wages on a par with in- 
creasing prices will meet the minimum de- 
mands of the employees and the best inter- 
ests of society. Since the standard of living 
depends primarily upon the income received 
and the prices of those commodities which 
constitute the objects of expenditure in 
workingmen's families, the increase in the 
cost of those commodities is the most ac- 
curate index of the exact amount by which 
wages must be increased in order to maintain 
the standard at a level. Wages and prices, 
therefore, must move simultaneously and on 
parallel lines, and arbitration boards, in de- 
termining the amount of wage advance, 
should seek to effect this result. 

For the successful application of the in- 
creased cost of living principle to wages, how- 
ever, trustworthy statistics of the advance 
in wages and in the retail prices of commodi- 
ties over a series of years, and data con- 
cerning consumption in workingmen's fami- 
lies must be obtained. Unfortunately, these 
statistics are not always available, and those 
that are in existence are frequently so frag- 
mentary and unreliable that little depend- 
ence can be placed upon them. Statistics of 



98 DETERMINATION OF RAILWAY WAGES 

consumption are probably the most complete 
and trustworthy of any of the three above 
mentioned. These give the cost and percent- 
age of total expenditure for a given income 
of the various commodities which workmen 
ordinarily purchase, the headings being usu- 
ally food, rent, clothing, fuel and light, and 
sundries. In applying the principle of the 
increased cost of living the percentage ad- 
vance in the retail price of the commodity is 
weighted by the percentage which the ex- 
penditure for that commodity bears to the 
total expenditure at a given income. Thus 
the proper importance is placed upon those 
commodities like food, which comprise the 
larger part of family expenditures. Doubt 
has often been expressed as to whether it is 
possible to ascertain the cost of various items 
in a budget representing a certain income. 
There is practically universal agreement 
nowadays that a reasonably accurate budget 
for any income can be constructed, if it is 
based upon a given social class and is relative 
to a given time and place. Statistics fulfill- 
ing these requirements have been gathered 
and published, and the similarity of the re- 
sults seems to bear out the above opinion as 
to the accuracy of budget statistics. The 
Federal Government, various state labor 
bureaus, committees working under the di- 



THE INCREASED COST OF LIVING 99 

rection of settlement houses, and private in- 
vestigators have all contributed data relating 
to budgets. The most comprehensive statis- 
tics on this subject are those embodied in 
the Eighteenth Annual Report of the United 
States Commissioner of Labor (1903) based 
on returns from 11,156 families. Probably 
the most careful statistics are those collected 
in the Greenwich House investigation and in 
the Chapin report on the standard of living 
in New York. 1 

The results of these three investigations are 
strikingly similar, those variations which do 
appear being explained by the fact that con- 
ditions in New York City differ from those 
in other sections of the country. For ex- 
ample, for incomes from $800 to $900, the 
expenditure for food varies in the three in- 
vestigations from 41.4 to 45.8 per cent of in- 
come; for rent, from 17.1 to 20.7 per cent; 
for clothing, from 10.3 to 14 per cent; and for 
fuel and light from 5 to 5.4 per cent. 2 These 
percentages are sufficiently accurate for the 
purpose of applying the principle of the in- 
creased cost of living. What is needed, how- 
ever, is the collection of budget statistics at 
frequent intervals, for in a period of ten or 

1 More, Wage-Earners' Budgets; Chapin, Standard of Living 
among Workingmen's Families in New York City. 

2 Eighteenth Annual Report, U.S. Commissioner of Labor, pp. 
585, 592; More, p. 58; Chapin, p. 70. 



100 DETERMINATION OF RAILWAY WAGES 

more years the consuming habits of families 
may undergo such a change that the former 
percentages will not represent the true propor- 
tion of total income expended for a given 
commodity. Again, there should be a classi- 
fication of laborers, and a separate budget for 
various incomes calculated for each class. It 
may happen that railway employees expend 
a larger proportion of their wages on cloth- 
ing and rent than do workmen in other in- 
dustries. 1 Such differences between various 
classes of the industrial population should 
be taken into account in applying the princi- 
ple of the increased cost of living, for varia- 
tions in the per cent of total income expended 
for a given commodity will be reflected in the 
amount of the advance in the cost of living. 
Finally, the budget statistics should cover a 
large number of families in both the East, 
West, and South, for, just as there are varia- 
tions in consumption between different classes 
of labor and for different amounts of income, 
so there are consumption variations between 
sections of the country due to climatic and 
other local conditions. 

The only available statistics of the changes 

1 For example, conductors must spend an excess over the average 
for rent and clothes on account of the number of layovers at the end 
of runs, and the need of presenting a good appearance while on 
duty (E. C. Robbins, "The Railway Conductors," Columbia 
University Studies, Vol. xl, No. 1, pp. 89-90). 



THE INCREASED COST OF LIVING 101 

in the retail prices of food from year to year 
are those published by the United States 
Bureau of Labor Statistics. In the railway 
arbitrations, the employees and the employers 
usually present exhibits based on these sta- 
tistics; in some few cases, however, the rail- 
ways have had recourse to the figures of the 
Bureau of Railway Economics, Dun's and 
Bradstreet's Agencies. From 1890 to 1907 
the price indexes published in the bulletins 
of the United States Bureau of Labor were 
based upon returns from sixty-eight locali- 
ties for thirty staple food articles, weighted 
according to the average consumption of the 
various articles in workingmen's families as 
shown by the Eighteenth Annual Report of 
the United States Commissioner of Labor. 
From 1907 on the indexes were based only 
upon fifteen articles of food, on which price 
quotations were collected from about forty 
localities. 1 Owing to the criticism that it was 
impracticable to calculate the real advance in 
the cost of food from 1890 down to the pres- 
ent time, on account of the fact that the num- 
ber of food articles was not the same for the 
entire period of years, the Bureau recalcu- 
lated the indexes from 1890 on, using the same 
fifteen articles of food for the earlier dates 

1 For method of calculating the old index numbers, see Bulletin, 
U.S. Bureau of Labor Statistics, No. 156, Appendix A, pp. 357-366. 



102 DETERMINATION OF RAILWAY WAGES 

as were employed as the basis for indexes 
after 1907. 1 In the latest bulletins of the 
Bureau of Labor Statistics, a new method of 
computing index numbers has been adopted, 
designed to show changes in actual, rather 
than in relative prices, and, by shifting the 
base from the average of 1890-1899 to the 
last completed year, to render a comparison 
with prices in other years possible without 
danger of miscalculation. 2 Apart from food 
statistics, the Bureau since 1907 has col- 
lected data concerning the retail prices of 
coal, anthracite and bituminous, 3 and has re- 
cently begun the gathering of gas prices. 4 

Food and coal, then, are the only commodi- 
ties for which retail price statistics over a 
period of years are available, and these two 
together represent approximately only thirty- 
five per cent of the total expenditure in work- 
ingmen's families. 5 It is evident, therefore, 
that the railways' assertion that the increase 

1 This change made in Bulletin, U.S. Bureau of Labor, No. 105. 

8 Bulletin, U.S. Bureau of Labor Statistics, No. 156, pp. 5-14, 
Appendix A, pp. 357-380. See also American Economic Review, 
December, 1915, pp. 928-931. 

8 First published in Bulletin, U.S. Bureau of Labor, No. 105, 
pp. 27-28. 

4 Ibid., pp. 28-30. 

6 According to the average budget, income $851 (More, p. 258), 
food represents an expenditure of 43.4 per cent, and fuel and light, 
5.1 per cent. Since the food articles of the Bureau's indexes repre- 
sent only about two thirds of the total expenditure for food, the 
total percentage for food and fuel would amount to about 35 per 
cent 



THE INCREASED COST OF LIVING 103 

in the cost of living cannot be determined 
with any degree of exactness is to some ex- 
tent justified. Without accurate statistics of 
the retail prices of food, rent, clothing, fuel 
and light, which together comprise almost 
eighty per cent of the total family expendi- 
ture, 1 it is impossible to use to the best ad- 
vantage the principle of the increased cost of 
living in arbitration proceedings. It may be 
well to quote from the report of the board in 
the arbitration of 1913 involving the Southern 
Railway and its maintenance of way em- 
ployees in order to show to what expedients 
the lack of proper official statistics reduces 
arbitration boards when attempting to find 
the amount of the advance in the cost of liv- 
ing. After obtaining the increase in food 
prices from the bulletins of the Bureau of 
Labor, the board assumed that on ten per 
cent of the employees' expenses there had been 
no increase; assumed again that eight per 
cent was spent on shoes, on which "we gather 
from evidence there has been the large aver- 
age increase of 25 per cent." Then, since 
"dry goods and clothing" was the "most 
comprehensive and representative" of the 
terms used in the employees' exhibits, the 

1 In the average budget income, $851, these items total 77.5 
per cent: food 43.4, rent 19.4, clothing 10.6, light and fuel 5.1. The 
remaining items are insurance 3.9 per cent and sundries 17.6 per 
cent. 



104 DETERMINATION OF RAILWAY WAGES 

board assumed that the twelve per cent in- 
crease in that item might well be applied to 
the forty per cent of expenditures still unac- 
counted for, concluding with the statement, 
"This calculation is not scientific, but it is 
the best we can do with the insufficient data 
before us." 1 It must be said that this board 
at least attempted to use other figures than 
those for the increases in the prices of food, 
which, one is given to understand in other 
exhibits and awards, constitute the entire 
increase in the cost of living. The statement 
of Mr. Perham, the Telegraphers' represent- 
ative in the "Nickel Plate" Arbitration 
(1914) that "the government reports upon 
the subject [cost of living] are scarcely ade- 
quate for a consideration of this subject, al- 
though in a manner they are informing" 2 
sums up the value of the existing official 
statistics to an arbitration board. 

There is urgent need for the regular col- 
lection of statistics of retail prices of food by 
the Federal Government and by the various 
state labor bureaus, working on some uni- 
form plan. The number of articles selected 
should be greater than fifteen, for these com- 
prise only about sixty-four per cent of the 
total food consumption, and therefore the 

1 Southern Railway Arbitration (1913), Report of Board, pp. 
8-10. 

8 "Nickel Plate" Arbitration (1914), Proceedings, p. 131. 



THE INCREASED COST OF LIVING 105 

figures now existing are not sufficiently com- 
prehensive to give a true index of the in- 
crease in the cost of food. The United States 
Bureau of Labor Statistics is now endeavor- 
ing to collect price data on thirteen addi- 
tional articles of food, 1 and when these are 
included, the general price index will more 
adequately represent the actual advance in 
food prices. Food statistics alone do not indi- 
cate the full amount of the cost of living, for 
the items of rent, clothing, fuel and lighting 
comprise about thirty-five per cent of the 
total expenditure. 2 The Federal Bureau has 
already published fuel and light statistics and 
is now collecting data for various articles of 
dress and house furnishing. 3 Nothing, how- 
ever, has been done in regard to rents. In 
1910, the Canadian Department of Labour 
began an investigation of rents of representa- 
tive workingmen's dwellings, with and with- 
out sanitary conveniences. The quotations 
for these are taken each month in forty-five 
cities of 10,000 population and upwards. 4 It 
seems that this method might be applied 
with good results in the United States. Be- 

1 Bulletin, U.S. Bureau of Labor Statistics, No. 156, Appendix A, 
p. 373. 

2 See above, p. 103 (note). 

8 Bulletin, U.S. Bureau of Labor Statistics, No. 156, Appendix A, 
p. 373. 

4 Department of Labour (Canada), "Wholesale Prices in Canada, 
1911," p. 222. 



106 DETERMINATION OF RAILWAY WAGES 

fore the principle of the increased cost of 
living as a basis of wage advance can be ap- 
plied satisfactorily in arbitration proceed- 
ings, the board must have at its disposal sta- 
tistics of the increase in the prices of food, 
rent, clothing, fuel and light over a period 
of years, so that it may determine with some 
exactness what has been the actual advance 
in the cost of living. 

As to statistics showing the increase in 
wages, conditions are even more chaotic than 
in the case of the cost of living. It is difficult 
to determine the exact wages of engineers, 
firemen, conductors, and trainmen, for the 
method of payment is neither the pure time 
nor the pure piece system. 1 For instance, the 
passenger engineers, by the award of the 
recent Western Arbitration Board (1915), 
are to be paid, according to weight on drivers 
of the engine used, from $4.30 to $5.00 for 
a day's run, that is, for one hundred miles or 
less, or six hours and forty minutes or less. 
Thus on a run of less than a hundred miles, 
or for less than six hours and forty minutes 
duration, the wage received would be the 
same as if the full distance had been run or 
the full time worked. On the other hand, if the 
run exceeds this distance or time, overtime 

1 D. A. McCabe, The Standard Rate in American Trade Unions, 
pp. 60-70, 72-76, 186 (note). 



THE INCREASED COST OF LIVING 107 

rules apply and the engineer draws pay in ex- 
cess of the minimum rate set in the schedule. 
Thus, an engineer working on the same run 
day after day, might, if the time consumed 
were greater than six hours and forty min- 
utes and varied from day to day, receive a 
different sum for each day's work. His total 
wage, therefore, cannot be determined by 
multiplying the rate by the number of days 
worked. Further confusion arises from the 
fact that, in unassigned service, an engineer 
may have a different run from day to day, 
with a different weight engine, or again, an 
engineer may be laid off one day and yet 
make the equivalent of two days' wages the 
next. 

In determining the increase in railway 
wages for the purpose of ascertaining whether 
wages have kept pace with increasing prices, 
the question arises as to whether wages mean 
earnings or rates. The railways maintain 
that the cost of living argument is funda- 
mentally directed to the establishment of 
the proposition that earnings have not kept 
pace with the increases in the prices of com- 
modities, and therefore wages, in connection 
with the cost of living, mean earnings. 1 The 
employees, on the other hand, contend that 

1 Western Engineers and Firemen's Arbitration (1915), Rail- 
ways' Brief, pp. 23-25; Proceedings, pp. 7557-7558. 



108 DETERMINATION OF RAILWAY WAGES 

the computation of the increase in wages 
should be based on the assumption that wages 
mean rates of pay, and that the high earnings 
which the railways show for the men are a 
result of the excessive hours worked. 1 They 
claim that it is not valid to assert that wages 
have kept pace with the increase in prices, if 
an employee must work continually over the 
time set for the minimum day in order to 
make his wages bear the increased prices of 
commodities. 

This argument of the employees seems es- 
sentially fair, but it is impossible to determine 
the advance in wages of a class of employees 
in a district as large as the West, on the basis 
of rates. In order to strike an average of the 
wages of engineers on a rate basis, it would be 
necessary to weight each different rate by the 
number of employees receiving it. When the 
number of rates according to the size of the 
locomotive, and the number of employees who 
may operate different locomotives from day 
to day are considered, it is evident that no 
such basis for computing wages can be 
adopted. In the Eastern Engineers' Arbitra- 
tion (1912) the employees submitted an ex- 
hibit designed to show the percentage in- 
crease in wages on the basis of rates on five 

1 Western Engineers and Firemen's Arbitration (1915), Proceed- 
ings, p. 7736. 



.THE INCREASED COST OF LIVING 109 

roads in the Eastern District. On only one of 
these roads — the Baltimore and Ohio — 
were they able to estimate the percentage 
increase from 1900 to 1910. 1 

The railways have used the statistics of 
"average daily compensation" published by 
the Interstate Commerce Commission to 
show the increase in the earnings of employ- 
ees over a period of years. These statistics 
are compiled from reports of the carriers to 
the Commission, and the average daily com- 
pensation is determined by dividing the ag- 
gregate amount paid each grade of employ- 
ment, engineers, conductors, etc., by the 
total number of days worked by the employ- 
ees of that grade. The number of days 
worked is determined by various methods on 
the different railways. The employees have 
objected strongly to the use of these sta- 
tistics on the ground that the methods for 
computing the number of days worked are 
so numerous as to preclude the possibility 
of a valid comparison between one road and 
another. 2 Again, the aggregate compensa- 
tion includes payments for overtime, and 
thus the average daily compensation rep- 
resents, not the rate for a day's work, but 
the earnings of employees who may be work- 

1 Eastern Engineers' Arbitration (1912), Engineers' Exhibits, 67. 

2 Eastern Firemen's Arbitration (1913), Proceedings, pp. 1700- 
1762. 



110 DETERMINATION OF RAILWAY WAGES 

ing considerably over the minimum day. 1 
It is claimed further that the figure for the 
average daily compensation of an engineer, 
for instance, does not represent a true aver- 
age, for all engineers are lumped together, — 
passenger, through freight, local freight, 
switching, etc., — and no account is taken of 
the various rates paid to engineers within 
these classes of service, based on differences 
in driver weights. Mr. P. H. Morrissey, 
employees' arbitrator in the Eastern Engi- 
neers' Arbitration (1912) characterized these 
statistics as used by the board in that case 
as "insufficient, unreliable, inaccurate, and 
misleading." 2 

These objections are valid, and any com- 
parison of one road with another, or any use 
of these statistics as a basis for calculating 
the amount of compensation received by the 
respective grades of employment would be 
liable to serious objection. However, it seems 
that they may be taken as a fair index of the 
percentage increase in general railway wages 
over a period of years, and that, after all, is 
what is needed for the application of the in- 
creased cost of living. The railway wage sta- 
tistics of the Commission would be of much 
greater service in arbitration proceedings if 

1 Eastern Engineers' Arbitration (1912), Report of Board, p. 114. 

2 Ibid., p. 114. 



THE INCREASED COST OF LIVING 111 

some one method of computing the number 
of days worked could be agreed upon and used 
on all the roads, and if employees could be 
sub-classified according to kind of service — 
passenger, through freight, etc. If these two 
changes were made, it would be possible to 
compare the roads throughout a territory, and 
to determine the amount of increase over a 
period of years in the wages of the employees 
engaged in each kind of railway service. 1 

In addition to the difficulty of applying the 
principle of the increased cost of living on 
account of the lack of adequate statistics, 
other drawbacks to its application have been 
brought forward in arbitration proceedings. 
The railways have questioned whether this 
principle is equally applicable in concerted 
movements as well as in those disputes in- 
volving only one road. In the Western En- 
gineers and Firemen's Arbitration (1915) it 
was argued that in a proceeding wherein the 
award was to be made applicable to appren- 
tices as well as to men earning as much as 
$3700 a year, the board could not work out 

1 The Interstate Commerce Commission has recently made radi- 
cal changes in its statistics of railway employment, the results of 
which will appear in its report for the fiscal year ending June 30, 
1915. The employees are classified into 68 instead of 18 occupa- 
tions and some of the more important grades are sub-classified ac- 
cording to the kind of service — passenger, freight, yard, etc. The 
number of hours instead of the number of days worked is to be re- 
ported in the future. The new statistics will undoubtedly be of much 
greater value than those formerly published. 



112 DETERMINATION OF RAILWAY WAGES 

a conclusion of general application from the 
premise of the increased cost of living. 1 In 
the Chicago, Burlington and Quincy Arbitra- 
tion (1914), on the other hand, the repre- 
sentative of the road held that "arguments 
for increases in rates of pay based upon in- 
creased cost of living should be heard only in 
concerted or general movements affecting all 
individuals in a particular class of service." 2 
The question of applicability may be con- 
sidered from the viewpoint of the territory 
concerned or the character of the employees 
involved. As to the territory, it may be said 
that statistics of food, rent, etc., cannot be 
gathered from every town or section in the 
United States. But if official statistics are 
collected covering a number of localities in 
all the States, a sufficiently accurate estimate 
of the increased cost of living may be ob- 
tained for any locality, state, or railway dis- 
trict into which the country is divided. If the 
statistics cover a sufficient area, it makes no 
difference whether the principle of the in- 
creased cost of living is applied in a single or 
in a concerted movement. From the stand- 
point of the employees concerned, it is ob- 
vious that, where wages are so different in 

1 Western Engineers and Firemen's Arbitration (1915), Rail- 
ways' Brief, p. 23. 

2 Chicago, Burlington and Quincy Arbitration (1914), Proceed- 
ings, pp. 9493-9496, 9773. 



THE INCREASED COST OF LIVING 113 

amount as in movements involving, for in- 
stance, conductors and trainmen or all grades 
of engineers, the percentage increase in the 
cost of living is not the same for all employ- 
ees. It is possible, however, to classify con- 
ductors and trainmen and other employees 
into income groups, the percentages of food, 
rent, etc., expenditure of which may be found 
by reference to budget statistics. The per- 
centage advance in the prices of food, rent, 
etc., weighted according to the percentages 
of expenditure in the different budgets, will 
then give the actual percentage increase in 
the cost of living for each income group. The 
increased cost of living principle should be 
applied uniformly, account being taken, how- 
ever, of the fact that the percentages to total 
income expended for various items vary with 
income. 

Another question which has been presented 
in railway arbitrations, merely as a possi- 
bility and never as an actual fact, is whether 
wages should be reduced if the cost of living 
is decreasing. The chairman of the Board of 
Conciliation and Investigation in the dispute 
between the Canadian Pacific and its main- 
tenance of way employees (1914) held that 
if the principle of the increased cost of living 
were allowed to govern wage advances logic 
demanded a proportionate decrease when 



114 DETERMINATION OF RAILWAY WAGES 

living costs were lessened. 1 The same argu- 
ment was brought forward by the Western 
railways in their dispute with the Firemen 
and Enginemen in 1910. 2 It has been argued 
that "if prices fall and wages remain un- 
changed, the cost of production on account 
of wages may become disproportionate and 
the crippling of industry result." 3 

The question as to whether or not wages 
should decrease in proportion to the decline 
in prices must be approached from two an- 
gles, according as the particular decline of 
prices in question is part of a long downward 
trend, or merely an incident of a brief period 
of business depression. The general movement 
of prices has shown an alternate rising and 
falling trend extending ordinarily over a con- 
siderable number of years. For instance, 
from about 1789 to 1809 prices rose rapidly, 
but there followed a period of falling prices 
lasting until 1849. In that year another up- 
ward trend began which continued for about 
twenty-five years, only to be broken by the 
long period of falling prices lasting from 1873 
to 1896. Since 1896 there has been a remark- 
able advance in prices, and, from all appear- 

1 Canadian Pacific vs. Maintenance of Way Employees (1914), 
in Labour Gazette (Canada), February, 1914, p. 907. 

2 Western Firemen and Enginemen's Arbitration (1910), Pro- 
ceedings, p. 2920. 

3 Department of Labour (Canada), " Wholesale Prices in Canada,'* 
1890-1909, p. 435. 



THE INCREASED COST OF LIVING 115 

ances, the end is not yet. 1 Within these long 
time movements, which may be explained by 
changes in money and in trade, occur periodic 
short time fluctuations, due in the main to the 
cumulative effect of contraction in demand, 
lessened profits, tight money, and increased 
business costs. With alternate periods of 
prosperity, crisis, and depression, prices rise, 
remain stable for a time, then fall only to 
rise again, the same phenomena being re- 
peated over and over. Thus, price move- 
ments are of two distinct kinds, and falling 
prices, therefore, may be an incident either 
of the long time downward trend or of the 
short time period of business depression. 

An equivalent and simultaneous decrease 
in wages and prices does not appear to violate 
the principle upheld in the preceding pages — 
the maintenance of the standard of living. 
A reduction in wages corresponding to the 
decline in the prices of those commodities 
consumed by the average workingman's fam- 
ily will not lower the laborer's standard of 
living. In spite of this fact, however, em- 
ployees have always strenuously resisted 
any reduction in money wages, even though 
they may be fully aware of the decline in 
prices. This resistance is based upon the 
failure of employees to distinguish clearly the 

1 Irving Fisher, The Purchasing Power of Money, pp. 240-246. 



116 DETERMINATION OF RAILWAY WAGES 

difference between real and money wages. 
That a decline in wages corresponding to 
the decrease in prices will not lower the stand- 
ard does not appeal to the reason of the aver- 
age employee, for the decline in prices at best 
is something intangible and not easily com- 
puted, whereas a reduction in money wages 
is definite and can be measured exactly by 
the employee himself. For this reason, a re- 
duction in wages corresponding to the de- 
cline in prices is never accepted without pro- 
test from the men, and is always attended 
with serious friction between employers and 
employees. This opposition on the part of 
labor has had its effect upon wage reductions 
during long periods of falling prices, for there 
has always been a noticeable lag in wages, 
so that at the end of the period wages have 
not been reduced by the same ratio as the 
decline in prices. 1 A long downward trend 
of wages, therefore, has tended to operate as 
a gain to labor and to bring about an ad- 
vance in the standard of living. 

Arbitration boards should keep the above 
tendencies in mind when they are confronted 
with demands for reductions in wages cor- 
responding to the decline in prices. They 
should be influenced by the desire to advance 

1 Report of Massachusetts Commission on Cost of Living, 1910, 
pp. 88-89. 



THE INCREASED COST OF LIVING 117 

the standard of living of any grade of em- 
ployees whenever possible, and since a period 
of declining prices offers an opportunity of 
effecting this desirable result by refusing a 
proportionate decrease in wages, boards may 
well adopt this principle, especially as friction 
between employers and employees may be 
avoided, and as the boards' award will cor- 
respond closely to the normal relation of 
wages and prices evident in former periods of 
declining prices. No definite rule as to the 
proper ratio of decrease in wages can be for- 
mulated, for the movement of wages must 
depend upon the relative abruptness of the 
decline in prices. The most that can be said 
is that the wage decrease, if any, should be 
at a smaller ratio than the decline in prices. 
When the price movement is a short time 
decrease accompanying business depression, 
wage reductions on the basis of decreased 
cost of living should not be allowed. In the 
preceding chapter it was shown that a wage 
reduction during periods of depression would 
operate to counteract certain forces of read- 
justment upon which the hope of business ex- 
pansion and of relief from stagnation largely 
depends. Furthermore, since periods of de- 
pression are usually temporary and are fol- 
lowed by a rapid rise in prices during busi- 
ness revival, wage reductions would simply 



118 DETERMINATION OF RAILWAY WAGES 

occasion immediate demands for increases in 
wages based on the increased cost of living 
caused by the return of business prosperity. 
Therefore, during periods of business de- 
pression, reductions in wages demanded on 
the ground of declining living costs should be 
disallowed. 

The underlying principle of the increased 
cost of living argument is the maintenance 
of the standard of living. Taken by itself, 
therefore, it has no claim as a basis for de- 
termining what share of the product right- 
fully belongs to the laborer; it merely aims 
to keep real wages at a constant level. Thus, 
the assumption upon which it rests is that 
the wage received prior to the demand for 
advance is a fair and adequate wage. Theo- 
retically viewed, the principle of the in- 
creased cost of living equalizes real wages 
from year to year, and provides no advance 
in the employees' standard of living. As an 
actual fact, however, the standard of living 
of any grade of employees is rarely station- 
ary, for even though the income factor re- 
mains constant, there is a possibility of de- 
velopment in the other factors governing the 
standard of living, the net result of which will 
be an advance in the employees' condition. 
The increase of scientific knowledge, inven- 



THE INCREASED COST OF LIVING 119 

tions, and more effective methods of produc- 
tion have served to better the living condition 
of society in general. Rapid strides in medi- 
cine and sanitation, and improvements in 
plumbing and drainage have made healthy, 
sanitary surroundings the rule, and not the 
exception. Improvements in the methods of 
producing and distributing gas and elec- 
tricity have so cheapened these commodities 
that they are fast displacing oil and other 
means of illumination. A few years ago, only 
the rich could purchase automobiles; now 
prices are decreasing steadily, and these 
luxuries are within the reach of successively 
lower classes in the scale of economic wel- 
fare. Amusements are many and cheap, and 
the increasing numbers of municipal parks 
and free playgrounds give ample opportunity 
to all classes for heathful recreation. These 
are but a few instances of the influence of the 
advance in civilization upon the standard of 
living. Even if there be no increase in real 
wages, the advantages accruing to laborers 
through the advance in civilization will serve 
to better the general conditions under which 
they live. 

The influence of the class of society to 
which an individual belongs and of the per- 
sonal factor upon the standard of living has 
already been mentioned. Ambition to rise 



120 DETERMINATION OF RAILWAY WAGES 

out of his class, more efficient management 
of the income, greater sobriety and industry 
all serve to advance a workingman's stand- 
ard of living. The development of these 
qualities is the aim of labor organizations, and 
their educational value to the country can 
scarcely be overestimated. Some of the rail- 
way brotherhoods help their members to be- 
come more efficient by conducting technical 
courses through the medium of their monthly 
publications. 1 The high standard of morals 
and health required for membership in the 
brotherhoods; the intimate association of 
members and their wives in the locals; and 
the suggestions exchanged in the Women's 
Auxiliaries cannot help but increase efficiency 
in home management and make for a wiser 
expenditure of income. The railway organi- 
zations are doing a splendid work in develop- 
ing their members. President W. G. Lee, of 
the Brotherhood of Railroad Trainmen, in 
an address at a convention of the Brother- 
hood of Locomotive Firemen and Engine- 
men, said that when "ambition demands a 
better living and better social conditions, the 
workman usually finds the way. The organ- 
izations of labor have educated their members 
in the way of better living standards with all 

1 For example, see the monthly magazines of the Brotherhood of 
Locomotive Engineers and the Brotherhood of Firemen and Engine- 
men. 



THE INCREASED COST OF LIVING 121 

that accompanies them, and they have also pro- 
vided the way to secure these advantages." 1 

As to the effect of the application of the 
principle of the increased cost of living upon 
the public, it is claimed that it will result in 
a continuous round of wage demands, which 
will be passed on to the public in the form of 
higher prices. The chairman of the Board of 
Conciliation and Investigation in the dis- 
pute involving the Canadian Pacific and its 
maintenance of way employees (1914) stated 
that " the increased cost of living is, unfortu- 
nately, a thing that seems to thrive upon 
itself; the increased cost of living requires 
higher wages and higher wages increase the 
cost of production, and the increased cost of 
production causes increased cost of living." 2 
Thus, when the necessity for a new wage in- 
crease arises, the employer must recoup him- 
self by increasing the price of his products. 
Numerous employers of labor testified before 
the Massachusetts Commission on the Cost 
of Living that the underlying cause of the 
rapid advance in the cost of commodities 
was the labor organizations which forced 
up costs of production by increasing the 
wages of their members. 3 That higher wages 

1 Locomotive Firemen's Magazine, August, 1910, p. 240. 

2 Labour Gazette (Canada), February, 1914, p. 906. 

3 Report of Massachusetts Commission on the Cost of Living, 
1910, pp. 303, 438, 442-443. 



in DETERMINATION OF RAILWAY WAGES 

mean increased prices is the opinion of many 
investigators of the workings of the Austra- 
lasian arbitration acts, 1 and some question 
the expediency of these acts for that reason. 
Other authorities, however, hold that in- 
creasing wages are not necessarily reflected 
in increased prices. Both the Massachusetts 
Commission and the Select Senate Committee 
on Wages and Prices reported that labor 
unions, although advancing wages and re- 
ducing hours, had not apparently been a 
serious factor in contributing towards ad- 
vancing prices ; but it was stated that a well- 
grounded opinion as to the actual effect of 
wages upon the cost of production could not 
be expressed. 2 According to Australasian 
experience, the influence of higher wages 
upon prices has varied greatly with different 
industries, and the general opinion there is 
that increases in wages have, to a certain ex- 
tent, increased prices, but that it is impossible 
to say whether the increase has been pro- 
portionate. 3 

1 Aves, Wages Boards, p. 56, Appendix, pp. 184-187; G. S. Beeby, 
"Artificial Regulation of Wages in Australia," Economic Journal, 
Vol. xxv, No. 99, p. 327. 

2 Report of Massachusetts Commission on the Cost of Living, 
1910, pp. 471-472; Select Senate Committee on Wages and Prices, 
Vol. i, pp. 122-123. 

3 Aves, p. 102; F. A. Russell, "Industrial Arbitration in New 
South Wales," Economic Journal, Vol. xxv, No. 99, pp. 344-354; 
Harvard Law Review, Vol. xxix, No. 1, p. 37; Bulletin, U.S. Bureau 
of Labor Statistics, No. 167, pp. 136-137. 



THE INCREASED COST OF LIVING 123 

In theory, it may be said that increased 
wages will increase costs, and consequently 
prices, if the efficiency of labor remains con- 
stant and if no economies in production are 
made to offset the advanced costs. Con- 
versely, increased prices will not result if 
the efficiency of labor is increased by the 
advanced wage, and if the increasing costs 
of production force employers to introduce 
more efficient methods of operation. There 
is a limit, however, to the extent to which in- 
creased labor efficiency and skillful manage- 
ment can be carried, and when this limit is 
reached, if the industry is to be carried on, 
any increase in wages will of necessity be 
shifted to the public in the form of advanced 
prices. 1 

Many railway officials claim that the rail- 
ways of the United States have reached this 
limit, and that operating costs have advanced 
so rapidly on account of incessant wage de- 
mands, increased taxes, large expenditures 
for terminals, and for various safety appli- 
ances and regulations required by law, that, 
if the roads are to continue in operation with- 

1 Report of Massachusetts Commission on the Cost of Living, 
1910, pp. 472-473; Hooker, "The Course of Prices at Home and 
Abroad," Journal, Royal Statistical Society, December, 1911, p. 15; 
Laughlin, "Causes of the Changes in Prices since 1896," Proceed- 
ings, American Economic Association, 23d Annual Meeting, De- 
cember, 1910, p. 35. 



124 DETERMINATION OF RAILWAY WAGES 

out serious loss in efficiency, rates must be 
advanced. 1 Railway labor has also urged in- 
creased rates for the roads, because the 
brotherhoods believed that their members 
would stand a better chance for wage ad- 
vances if the revenues of the railways were 
increased. 2 

It is impossible to state whether or not the 
railways have actually reached the point 
where rates must be increased and where 
labor cannot be made more productive and 
no further economies introduced. Rates in 
the Eastern District have recently been 
raised five per cent. The exhibits of the West- 
ern railways in the Engineers and Firemen's 
Arbitration of 1915 showed that in three 
years ending June 30, 1913, $660,000,000 had 
been spent for additions, extensions, and for 
increasing the efficiency of train movements 
by grade reductions, elimination of curves, 
heavier rails, etc. 3 In the Western Advance 
Rate Case (1910) President McCrea, of the 
Pennsylvania, testified that in spite of the 

1 Eastern Firemen's Arbitration (1913), Proceedings, p. 2481; 
Advanced Rate Hearings (1910), S. Doc. No. 725, 61st Cong., 3d 
Session, pp. 292, 4297, 4346; F. H. Dixon, pp. 245, 252; Railway 
Age Gazette, Vol. lvii, No. 19, pp. 865-866. 

2 Western Engineers and Firemen's Arbitration (1915), Pro- 
ceedings, p. 7741; The Railroad Trainman, July, 1912, p. 637; 
Locomotive Firemen's Magazine, September, 1910, p. 423. 

3 Western Engineers and Firemen's Arbitration (1915), Rail- 
ways' Brief, pp. 105-106. 



THE INCREASED COST OF LIVING 125 

wage advances, that road had been able to 
pay regular dividends and to lay aside a large 
surplus by introducing such economies as 
grade reductions, larger locomotives, and 
cars of greater capacity. 1 In view of the re- 
cent rate advances, and of the large expendi- 
tures of the roads for more efficient opera- 
tion, and of the fact that at present the rail- 
ways are overwhelmed with shipments for the 
countries at war in Europe, it seems unlikely 
the application of the increased cost of liv- 
ing principle as a basis of wage advance will 
necessarily result in the payment of higher 
rates by the public. 

The question of the ability of the railways 
to pay wage advances based on the increased 
cost of living principle has come before nu- 
merous arbitration boards in Canada and in 
the United States. The attitude of the boards 
in the two countries has been very different. 
The usual practice in the United States has 
been to deny the existence of any relation 
between wages and railway earnings, and 
profitable and unprofitable roads alike have 
been forced to pay similar wages and to grant 
identical increases. In Canada, on the other 
hand, the boards have frequently cut down 
wage advances or have disallowed them alto- 
gether on the ground that the road is not in a 

1 Western Advance Rate Case (1910), Vol. iv, p. 2298. 



126 DETERMINATION OF RAILWAY WAGES 

strong financial condition. In periods of busi- 
ness depression, the custom in Canada has 
been to dismiss the demands of the employees 
and to recommend their consideration at some 
more opportune time. 

In times of normal business activity, the 
inability of the roads to pay wage advances 
based on increased living costs should not be 
considered, for the maintenance of the stand- 
ard of living is of paramount importance not 
only to the grade of employees concerned but 
to the welfare of the whole nation. The 
effect of such action on the part of arbitra- 
tion boards would be either to force a few 
employers out of business, or, if the entire 
industry were at the limit where any increase 
in wages meant an increase in prices, to place 
an additional burden upon the public. It 
seems that the effect of either of these even- 
tualities upon the well-being of the nation as 
a whole will be less harmful than a reduction 
in the standard of living. 

During periods of business depression, de- 
mands for wage advances based on the in- 
creased cost of living principle are not likely 
to be presented, for prices are usually de- 
clining at such times. If the depression occurs 
during one of the long time upward move- 
ments of prices, it may happen that, even 
taking into account the fall of prices due to 



THE INCREASED COST OF LIVING 127 

the depression, there is an increase in the cost 
of living since the last wage adjustment, and 
the employees may be entitled to a wage ad- 
vance in spite of the business depression. An 
advance in wages on the basis of the increased 
cost of living, however, should not be granted 
during periods of business depression. These 
are temporary phenomena, and employees 
should hold over their demands until a more 
propitious time. Railway employees, as a 
rule, have refrained from requesting in- 
creases during periods of depression. Thus, 
after the formation of the Eastern Associa- 
tion of General Committees of the Conduc- 
tors and Trainmen in 1907 and the formula- 
tion of a notice to be served on the railways 
early in 1908, it was decided to defer action 
until a more opportune time and the de- 
mands were not made until January, 1910. l 
A circular letter of the Southern Association 
of the same brotherhoods distributed in 1905 
said, "It is, of course, necessary always to 
give proper consideration to business condi- 
tions and the appropriateness of the time at 
which requests are preferred." 2 In periods 
of business depression, therefore, employees 
would best serve their own interests by hold- 
ing over their demands until a favorable 

1 Proceedings, Railway Conductors, 1909, pp. 89-96. 

2 Ibid., 1905, pp. 80-81. 



128 DETERMINATION OF RAILWAY WAGES 

opportunity presents itself, and if, during 
periods of depression, demands are made on 
the basis of the increased cost of living, arbi- 
tration boards should refuse to grant any in- 
creases. 



CHAPTER IV 

INCREASED PRODUCTIVE EFFICIENCY 

In the majority of the arbitrations under 
the Erdman and Newlands Acts, the railway 
employees based their demands for wage 
advances upon the principles of standardiza- 
tion, the living wage, and the increased cost 
of living. In the Denver and Rio Grande 
Arbitration, November 1, 1910, increased 
productivity arising out of improvements in 
the train machine was brought forward as a 
basis of wage advance, and from that time 
on the principle of increased productive effi- 
ciency has held a strikingly important posi- 
tion in succeeding arbitrations. Standardiza- 
tion aims to establish a standard rate within 
a given area in order to prevent less prosper- 
ous roads from paying wages lower than the 
standard. The principle of the living wage 
contemplates the grant of compensation to 
low-paid men sufficient to secure the normal 
standard of living. The basic aim of the in- 
creased cost of living principle is to prevent 
a reduction in real wages and to maintain the 
standard of living of all grades of employ- 
ment. Increased productive efficiency, how- 
ever, the railway employees claim, is a posi- 



130 DETERMINATION OF RAILWAY WAGES 

tive, constructive principle for securing to 
the employees a proper measure of partici- 
pation in economic advancement. As Mr. 
W. S. Stone, President of the Brotherhood of 
Locomotive Engineers, says, "It is used to 
designate an economic right and a principle 
of economic justice." * 

The principle of increased productive effi- 
ciency has its foundation in the advancing 
productive capacity of the train machine. 
Within the past ten or fifteen years the size 
and power of locomotives, the capacity of 
freight cars, the average tonnage of freight 
trains, and the average length of both freight 
and passenger trains have increased enor- 
mously. In 1910 the average freight car ca- 
pacity in the Eastern District had increased 
28.6 per cent over 1902, 2 and the tractive 
power of locomotives on all railways in- 
creased 48 per cent from 1902 to 1914. 3 From 
1902 to 1911 the average freight train load in 
the Eastern District increased from 264 to 
nearly 460 tons or an advance of over 25 per 
cent. 4 In 1902 the average number of cars 

1 Western Engineers and Firemen's Arbitration (1915), Pro- 
ceedings, p. 7747. 

2 Eastern Firemen's Arbitration (1913), Supplemental Report of 
International President, p. 1134. 

3 Bulletin, Bureau of Railway Economics, No. 66, p. 48; No. 81, 
p. 41. 

4 Eastern Conductors and Trainmen's Arbitration (1913), Rail- 
ways' Brief, p. 54. 



INCREASED PRODUCTIVE EFFICIENCY 131 

to a passenger train was 3.95, in 1911 it was 
5.23. * There is no doubt that the train ma- 
chine is more productive now than a decade 
ago, for the increased size of locomotives, 
cars, and trains has permitted the carriage of 
a greater tonnage or of a greater number of 
passengers in one train movement. This in- 
creased productive capacity has resulted in 
large advances in revenues. In 1913 the 
operating revenues of the railways of the 
United States totaled over three billion dol- 
lars, in 1900 about one and a half billions. 2 
It is true that other factors have contributed 
to this vast revenue gain; for example, the 
increase in business, more efficient office 
methods, improved terminal facilities, in- 
creased rapidity and safety of train move- 
ments through the elimination of curves and 
the reduction of grades, and the installation 
of interlocking and block signals. The in- 
creased productive capacity of the train ma- 
chine itself, however, is chiefly responsible for 
the advance in revenues. 

These revenue gains, of course, have been 
made possible by the increase in railway out- 
put, the larger number of tons and passengers 
transported by means of the more efficient 

1 Eastern Conductors and Trainmen's Arbitration (1913), Rail- 
ways' Brief, p. 14. 

2 Statistics of Railways of the United States, Reports of Inter- 
state Commerce Commission, 1900, p. 72; 1913, p. 48. 



132 DETERMINATION OF RAILWAY WAGES 

train machine. Thus, if the efficiency of any 
train on a given run is increased by the sub- 
stitution of a locomotive of greater tractive 
power and cars of larger capacity, the result 
is an increase in the output of that train and 
in the revenue received from that one train 
movement. 

The employees claim that if the efficiency 
of the train machine is increased, the effi- 
ciency of those employees in any way con- 
nected with its operation is increased in a 
like degree, for, as the railway is receiving 
a greater number of ton miles and passenger 
miles per train, so it is receiving a greater 
number of ton miles and passenger miles per 
train crew. Therefore, the employees assert, 
since they are more productive than for- 
merly, their increased productive efficiency to 
the railway should be recognized by participa- 
tion in the increased output to which they 
have directly contributed. The fundamental 
claim of the employees, then, is that they 
should participate in revenue gains accord- 
ing to their respective contributions to in- 
creased output. Thus, President W. S. Stone 
in the Western Engineers and Firemen's 
Arbitration (1915) said that "rates of pay 
should be adjusted to the value of the con- 
tribution in terms of output, and a corre- 
sponding participation given to employees in 



INCREASED PRODUCTIVE EFFICIENCY 133 

the value of the output"; 1 and again, "If we 
are to have a proper measure of economic 
well-being and advancement, ... it is evident 
that the principle of productive efficiency 
must be recognized in fixing wage payments, 
and the financial or corporate control of the 
transportation industry must be so regu- 
lated and adjusted to democratic institutions 
that a proper measure of participation in 
revenue gains may be made possible to rail- 
road employees." 2 

This fundamental principle of participa- 
tion in revenue gains according to specific 
contribution to output is applicable to all 
railway employees either remotely or di- 
rectly concerned with the operation of the 
improved train machine. The contribution 
to increased output of each grade of railway 
employment is to be determined, each em- 
ployee of that grade receiving a share of the 
total increased output imputable to his grade 
of employment. The train service employees, 
however, — the engineers, conductors, fire- 
men, and trainmen — those directly con- 
nected with the operation of the improved 
train machine, are to receive in addition to 
the share of increased output imputable to 
each of these grades by reason of their in- 

1 Western Engineers and Firemen's Arbitration (1915), Pro- 
ceedings, pp. 7745-7746. 

2 Ibid., p. 7747. 



134 DETERMINATION OF RAILWAY WAGES 

creased productive efficiency, a further share 
in revenue gains, measured by the increased 
labor, risk, and responsibility which the opera- 
tion of larger locomotives and trains entails 
upon these particular grades of railway labor. 
The conductors and trainmen assert that 
with the larger cars in service they have more 
passengers or more tons of freight in their 
charge and that their responsibility is cor- 
respondingly increased. The firemen claim 
that locomotives of greater tractive power 
require the shoveling of more coal; and the 
engineers maintain that the larger the loco- 
motive, the more complicated the mechanism 
under their control, and the larger the train, 
the greater the number of passengers and the 
amount of freight for which they are re- 
sponsible. 

Increased labor, risk or responsibility occa- 
sioned by the improvement in the train ma- 
chine as a part of the principle of productive 
efficiency concerns the train service em- 
ployees only, and it is used solely as an argu- 
ment for the payment to the train service 
employees of a larger relative share in the 
revenue gains than that due to other grades 
of railway labor, whose work, hazard, and 
responsibility are not increased by larger 
locomotives, cars, and trains. This point 
was clearly presented in the Western Engi- 



INCREASED PRODUCTIVE EFFICIENCY 135 

neers and Firemen's Arbitration (1915), in 
which the position of the employees was 
stated to be "that all railroad employees, 
whether their work increased or not, and 
whether they were remotely or directly con- 
nected with improved operating conditions, 
should participate in revenue gains," and in 
addition "that those classes of employees 
who bore the direct burden and responsi- 
bility of the increased productive efficiency, 
such as the engineers and firemen in railroad 
operations, should have a proportionately 
larger share." l 

It has been necessary to go into some detail 
in the explanation of the employees' con- 
ception of increased productive efficiency on 
account of the difference of opinion as to the 
real meaning which they attach to it. Rail- 
way representatives have referred to it as an 
"elusive phrase" 2 on the ground that it is 
sometimes "treated in the employees' evi- 
dence as wholly independent of the question 
of increased labor and responsibility, and at 
other times as arising out of or caused by 
such added labor and responsibility." 3 Coun- 
sel for the Western roads in the recent arbi- 
tration involving the Engineers and Firemen 
stated that " the whole question of productive 

1 Western Engineers and Firemen's Arbitration (1915), Pro- 
ceedings, p. 7731. 

2 Ibid., Railways' Brief, p. 4. 3 Ibid., Railways' Brief, p. 4. 



136 DETERMINATION OF RAILWAY WAGES 

efficiency, in its last analysis, comes down to 
the simple question : Has there been a change 
in labor or responsibilities of the engineer 
and firemen during the period under discus- 
sion?" 1 

This erroneous view of the employees' idea 
of the principle of increased productive effi- 
ciency is the natural consequence of the in- 
volved and conflicting statements in their 
briefs and exhibits. Thus, in the Eastern 
Firemen's Arbitration (1913) the increase in 
labor was made the fundamental point in the 
argument 2 and in the Conductors and Train- 
men's Arbitration of the same year, in- 
creased productive efficiency was considered 
to be the outcome of the greater hazards in- 
cident to the handling of larger cars and ton- 
nage. 3 The principle of increased productive 
efficiency was not fully developed and clearly 
defined in these earlier arbitrations. It did 
not receive accurate and explicit formulation 
until the Western Engineers and Firemen's 
Arbitration in 1915. In this case, the em- 
ployees denied the identity of wage demands 
based on increased productive efficiency and 
on increased labor, risk, and responsibility, it 

1 Western Engineers and Firemen's Arbitration (1915), Proceed- 
ings, pp. 7525, 7558; Railways' Brief, p. 14. 

2 Eastern Firemen's Arbitration (1913), Supplemental Report 
of International President, Employees' Brief, p. 1237. 

3 Eastern Conductors and Trainmen's Arbitration (1913), Em- 
ployees' Final Brief, pp. 6-7. 



INCREASED PRODUCTIVE EFFICIENCY 137 

being stated that the men expected the in- 
vention of new machinery and of labor sav- 
ing devices to lessen their labor and responsi- 
bility, but at the same time they expected to 
share in the gains made possible by industrial 
advancement. 1 At the present time there is 
no room for doubt as to the meaning which 
the employees attach to the phrase increased 
productive efficiency. It need only be borne 
in mind that this principle is based upon the 
increased productive capacity of the train 
machine, and that the primary effect of this 
is an advance in the revenues which, the em- 
ployees claim, should be shared among all rail- 
way workers according to their respective 
contributions to increased output. 

In the following pages, therefore, by in- 
creased productive efficiency is meant solely 
participation in revenue gains according to 
specific contribution to increased output. 
Increased labor, risk, and responsibility, in 
reality, have no connection with the under- 
lying principle involved in the employees' 
argument. They have been considered by the 
train-service employees as a part of their 
argument for participation, because both 
their claims for participation and for wage 
advances on account of increased labor, risk 

1 Western Engineers and Firemen's Arbitration (1915), Pro- 
ceedings, pp. 7730-7731, 2247-2248. 



138 DETERMINATION OF RAILWAY WAGES 

and responsibility, find their ultimate basis 
in the introduction of the improved train ma- 
chine. It is probable, however, that changes 
may occur in the conduct of transportation, 
other than those connected with the intro- 
duction of larger locomotives, cars, and trains, 
which may affect the labor, risk and responsi- 
bility of other grades of employment as well 
as of the train-service men. For this reason, 
therefore, arguments for wage advances based 
on the principle of increased labor, risk, and 
responsibility may be presented by all rail- 
way employees, entirely apart from any ar- 
gument based on increased productive effi- 
ciency. Confusion is avoided, consequently, 
by treating the former principle as a basis of 
wage advance entirely separately from in- 
creased productive efficiency, and this plan 
is adopted in the following pages — the dis- 
cussion of increased productive efficiency 
being followed by a treatment of increased 
labor, risk and responsibility. 

The attitude of the railways toward the 
principle of increased productive efficiency 
discloses some of the most convincing ob- 
jections to it. It will be unnecessary to de- 
vote attention to the claim of the roads that 
recent advances in pay have fully compen- 
sated employees for any productivity added 
by the improved train machine. This is 



INCREASED PRODUCTIVE EFFICIENCY 139 

merely a question of fact and has no bearing 
whatever upon the validity of increased pro- 
ductive efficiency as a principle of wage 
advance. The railways maintain that the 
participation of employees in revenue gains 
according to their contribution to increased 
output is inequitable, because there is no 
tangible relation between the work of the 
employees and increased output. The in- 
crease in railway product or output measured 
in terms of ton or passenger miles depends 
(1) upon increased traffic and (2) upon the 
increased capacity of the train machine, and 
to these two factors employees contribute 
nothing. 

(1) Increased traffic is a result of the nat- 
ural growth of the country tributary to the 
various lines, of the location, development, 
and encouragement of new industries in this 
territory, and of the working out of favorable 
traffic relations with other lines at points of 
interchange. The roads claim that executives 
of the industrial, traffic, and operating de- 
partments originate, increase, and handle 
this traffic, and the activity of employees has 
no tangible relation whatsoever to the vol- 
ume of business or to the revenues received. 1 

(2) Furthermore, output is conditioned 

1 Chicago, Burlington and Quincy Arbitration (1914), Proceed- 
ings, pp. 9504-9505; Western Engineers and Firemen's Arbitration 
(1915), Railways' Brief, pp. 6-7. 



140 DETERMINATION OF RAILWAY WAGES 

upon the capacity of the train machine, and 
increases in this capacity depend in great 
measure upon improved equipment and more 
efficient loading of freight or handling of pas- 
sengers. Large sums of money have been 
spent upon improvements in the plant, loco- 
motives of greater tractive power, and cars 
of larger capacity. The introduction of these 
has been made possible by the credit of the 
railways, and the employees have no connec- 
tion with railway credit. 1 As to more efficient 
loading, the roads claim that this is entirely 
under the control of officers in the operat- 
ing and traffic departments, who, working 
in conjunction with shippers, establish car- 
load minima and bring about the more effi- 
cient loading of trains. According to orders, 
the employees handle a short or long train, 
empty or loaded to its full capacity, badly 
or efficiently loaded. Train crews, therefore, 
the roads assert, have no influence in de- 
termining the number of passenger or ton 
miles produced. Since increased output is 
a result of increased traffic and capacity of 
trains, and since employees contribute noth- 
ing to these factors, the railways argue that 
no logic can justify the participation of em- 
ployees in the revenue gains resulting from 

1 Chicago, Burlington and Quincy Arbitration (1914), Proceed- 
ings, p. 9504. 



INCREASED PRODUCTIVE EFFICIENCY 141 

this increased output. Employees have no 
relation to output, for "they produce train 
and locomotive miles, not ton and passenger 
miles." * 

But, even if it be admitted that a rela- 
tion between employees and increased output 
does exist, the railways contend that there 
is no reasonable method of determining how 
much of the increase in ton or passenger miles 
is due to the respective contributions of the 
several grades of employees, of capital, and of 
managerial efficiency. If train service em- 
ployees contribute to increased output, then 
so do track foremen, station agents, train 
dispatchers, machinists, car builders, general 
managers, and stockholders and bondhold- 
ers who contribute to the funds from which 
are made the payments for improved equip- 
ment. 2 The railways suggest that the state- 
ments of employees would lead to the belief 
that all the increase in railway revenues had 
been due to the energy, loyalty, and skill of 
the employees. 3 The roads assert that if it 
be admitted that employees should share in 
increased output, a fair division must be 
made, and the employees' exhibits are ab- 

1 Chicago, Burlington and Quincy Arbitration (1914), Proceed- 
ings, pp. 9502-9503. 

2 Eastern Conductors and Trainmen's Arbitration (1913), Re- 
port of Board, pp. 70-71. 

3 Chicago, Burlington and Quincy Arbitration (1914), Proceed- 
ings, p. 9500. 



142 DETERMINATION OF RAILWAY WAGES 

solutely barren of any information which 
would enable an arbitration board to de- 
termine how much of the increase in output 
could be attributed to the increased produc- 
tivity of the several grades of employees, 
to the additional capital investment, and to 
increased managerial efficiency. 1 Thus, the 
railways claim that the principle of increased 
productive efficiency attempts to establish 
a relation between employees and increased 
output, when no such relation exists; and, 
even if it did exist, the absence of any fair 
means of calculating the respective contribu- 
tions of the factors would render the applica- 
tion of the principle impossible. 

No definite statement of the position of 
arbitration boards in regard to the princi- 
ple of increased productive efficiency can be 
made, for a sufficient number of boards have 
not dealt critically with this principle. In 
the Eastern Conductors and Trainmen's 
Arbitration (1913) the employees contended 
that the practice of double-heading increased 
the productivity of train crews. The board 
ruled, however, that the increased produc- 
tivity of the train was due to the increased 
number of engines and not to any measurable 
extent to the contribution to extra produc- 

1 Chicago, Burlington and Quincy Arbitration (1914), Proceed- 
ings, pp. 9499-9500; Western Engineers and Firemen's Arbitration 
(1915), Railways' Brief, p. 8. 



INCREASED PRODUCTIVE EFFICIENCY 143 

tivity of the train crew itself. 1 In view of the 
rulings of this board, and of the slight ad- 
vances granted by the Western Engineers and 
Firemen's Board in 1915 in the face of a vig- 
orous appeal to the principle of increased 
productive efficiency, it may be said that the 
tendency of arbitration boards at present is 
to reject this principle as a basis of wage 
advance. 

The position of the employees and of the 
railways, and the findings of the boards in 
regard to the principle of increased produc- 
tive efficiency have been discussed; it re- 
mains to consider the validity of this prin- 
ciple and the possibility of its application in 
arbitration proceedings. 

The specific productivity theory of wages 
and the principle of increased productive 
efficiency are based upon two propositions 
— the existence of a definite relation be- 
tween employee and product, and the possi- 
bility of measuring the amount of product 
imputable to labor. Thus, the specific pro- 
ductivity theory asserts that the amount of 

1 Eastern Conductors and Trainmen's Arbitration (1913), Report 
of Board, p. 22. This board separated mine service from through 
freight service and awarded a higher rate to mine service. The 
board said: "In mine service, in some places, in which a train is 
drawn by two engines, a train crew is sometimes broken up in order 
that each half of the crew may serve each engine separately. In such 
service, the prevailing opinion of the board is that the train crew, as 
distinguished from the engine crews, does contribute to the in- 
creased productivity of the train. . . ." 



144 DETERMINATION OF RAILWAY WAGES 

compensation received by labor under per- 
fect competition tends to be measured by the 
amount of product which its marginal unit 
produces. Increased productive efficiency 
contends that the amount of wage advance 
which the laborer should receive should be 
measured by the amount of the increased 
product which he has produced. Again, both 
theory and principle imply that the specific 
contribution of the laborer to the entire prod- 
uct, or to increased product, is ascertainable. 
Attempts have been made to demonstrate 
the possibility of applying the specific pro- 
ductivity theory in arbitration proceedings, 1 
but these attempted demonstrations are ex- 
tremely vague and inconclusive. The con- 
sensus of opinion in regard to the practical 
value of the specific productivity theory is 
that it offers no aid whatever to arbitrators 
seeking to determine the proper wage of the 
employees under consideration. 2 Since the 
principles of specific productivity and in- 
creased productive efficiency are virtually 
identical in their underlying principles, it may 
be argued that the latter is similarly inap- 
plicable in arbitration proceedings. It will 

1 J. B. Clark, Essentials of Economic Theory, Chap. xxvr. See 
also Proceedings of the American Economic Association, 1907, 3d 
scries, Vol. vin, No. 1, pp. 22-28. 

2 Proceedings of the American Economic Association, pp. 30, 
3i-35, 39. 



INCREASED PRODUCTIVE EFFICIENCY 145 

be necessary, however, before such a con- 
clusion can fairly be reached, to examine the 
validity of the assumptions upon which the 
principle of increased productive efficiency 
rests; that is, the existence of a definite rela- 
tion between employees and increased prod- 
uct, and the possibility of measuring their 
precise contribution to it. 

There seems to be no doubt that the total 
product of the railways is a result of the joint 
activity of all the factors of production. An 
increase in the total product may be obtained 
by an increase in the efficiency of any one of 
these factors, and the resulting output is still 
a joint product. It is evident, therefore, that 
employees, along with the other factors of 
production, have a direct relation to the out- 
put, in that this output results from the joint 
activity of all the factors. It does not follow, 
however, because there is a greater output 
apparent after an increase in the efficiency of 
one of these factors, that there is also an in- 
crease in the productivity of all the other 
factors. Thus, the train machine may be im- 
proved so as to permit the transportation of 
an increased number of tons or passengers, 
but the increased revenue therefrom can be 
regarded only as arising out of the improved 
train machine, and not from any increased 
productivity of the train crew itself. The 



146 DETERMINATION OF RAILWAY WAGES 

product of the improved train machine is still 
a joint product, but any increase in this prod- 
uct apparent after the substitution of im- 
proved machinery must be attributed to that 
factor; and employees, simply because they 
are working with a more efficient machine, 
can claim no share in the increased output on 
the ground that a portion of this increase 
is due to their greater productivity. It 
seems, then, that the railways' contention, 
and the finding of the Eastern Conductors 
and Trainmen's Board (1913) that the in- 
creased product, where there is no greater 
labor, risk, and responsibility, is due to the 
increased productivity of the machine itself 
and not to the greater productive efficiency 
of the employees, is the only logical conclu- 
sion which can be drawn from a consideration 
of the relation of employees to increased 
output. 

When an attempt is made to ascertain the 
precise contribution of employees and of 
other factors to the increased output, the 
impossibility of applying the principle of in- 
creased productive efficiency becomes an 
even greater obstacle to its acceptance as a 
basis of wage advance. The employees' ex- 
hibits devote little attention to this problem, 
being limited almost entirely to showing: 
(1) that there has been an increase in output 



INCREASED PRODUCTIVE EFFICIENCY 147 

in ton and passenger miles between two 
periods; * (2) that although operating costs 
have increased, there has been more than a 
proportionate advance in operating revenues ; 
(3) that increases in operating costs have been 
due to factors other than the particular grade 
of labor in question; (4) that after these in- 
creased operating costs have been paid, a 
substantial net gain in revenue has been 
made during the period under consideration; 
(5) that the disposition of revenue gains has 
been for the benefit of capital, and therefore 
labor has not received a reward for its in- 
creased productive efficiency. 

The crux of the whole question is the pos- 
sibility of measuring the contribution of em- 
ployees to increased output. In the Eastern 
Firemen's Arbitration (1913) the employees 
arbitrarily assumed that firemen should par- 
ticipate in transportation revenue in the same 
proportion as the ratio of their total com- 
pensation to the transportation expenses. 
Thus, the ratios of the wages of firemen to 
the cost of transportation for 1902 and 1912 
were found, and it was claimed that these 
percentages of the transportation revenues 
for each of the years represented the revenue 
attributable to firemen for the respective 

1 Western Engineers and Firemen's Arbitration (1915), Em- 
ployees' Brief, p. 73; Eastern Firemen's Arbitration (1913), Sup- 
plemental Report of International President, p. 413. 



148 DETERMINATION OF RAILWAY WAGES 

years. The difference in the revenue imput- 
able to firemen respectively for 1902 and 1912 
minus the increase in wages in that period, 
therefore, represented the portion of revenue 
gains which should be paid to the employees 
of that grade. 1 According to this method 
only those factors in production appearing 
in transportation expense accounts would re- 
ceive a share in transportation revenues. 
When it is stated that transportation ex- 
penses in 1912 comprised only about fifty per 
cent of total operating expenses and that 
transportation revenues amounted to nearly 
ninety-nine per cent of total operating rev- 
enues, 2 it is at once clear that this method 
is unjust, since it gives no participation in 
increased revenues to stockholders, main- 
tenance of way labor, etc., and makes no 
allowance for appropriations to additions, 
betterments, surplus, etc., — these items not 
appearing as transportation expenses. 3 If fac- 
tors are to share in the revenue gains in the 
proportion that they enter into expenses, it 
seems fairer to calculate the share of increased 
income on the basis that every item of ex- 
pense is entitled to receive a proportionate 
part. 

1 Eastern Firemen's Arbitration (1913), Supplemental Report of 
International President, p. 426. 

2 Statistics of Railways of United States, 1912, pp. 55, 57. 
8 Ibid., p. 57. 



INCREASED PRODUCTIVE EFFICIENCY 149 

In the following illustration an attempt is 
made to determine according to this method 
the increased productive efficiency of firemen 
on all railways in the United States between 
the years 1902 and 1912. This will demon- 
strate, it is hoped, that in order to arrive at 
any statistical calculation of the wage ad- 
vance warranted by increased productive 
efficiency, such arbitrary assumptions must 
be made as to render the statistical method 
entirely inapplicable. The object of the cal- 
culation described below is to determine the 
share of increased output attributable to fire- 
men between the years named, assuming as 
the share of firemen in revenue gain, the ratio 
of the cost of firemen to total expenses, and 
applying this ratio, not to transportation 
revenue, but to income from all sources. 
Since the firemen are to participate in the 
output, an attempt is made to calculate a 
unit of output — the traffic unit suggested in 
the Western Engineers and Firemen's Arbi- 
tration (1915). 1 This unit represents both 
freight and passenger traffic according to the 
income received for each kind of service. For 
example, in 1912 a ton mile yielded in in- 
come as much as .381 passenger miles. Conse- 
quently, the total number of traffic units is 

1 Western Engineers and Firemen's Arbitration (1915), Proceed- 
ings, pp. 7738-7739. 



150 DETERMINATION OF RAILWAY WAGES 

equal to the sum of the passenger miles and 
of the ton miles reduced to passenger miles. 
The income of the railways from all sources 
may be regarded as the return from this total 
of traffic units, and thus, the income attrib- 
utable to each traffic unit may be determined. 
In like manner, the total expenses of the rail- 
ways may be regarded as the cost of produc- 
ing the traffic units, and, therefore, when the 
cost per traffic unit is ascertained, the net 
income per traffic unit may be determined. 

Total expenses in 1912 represented 88.2 
per cent of the total income, or of the total 
number of traffic units, and the factors rep- 
resented in the total expense accounts pro- 
duce 88.2 per cent of the traffic units. The 
firemen in 1912 received 2.31 per cent of the 
total expenses, or they produced 2.31 per 
cent of the traffic units attributable to the 
items in the expense accounts. Since the net 
income per traffic unit has been determined, 
that part of the total net income attribut- 
able to firemen may be calculated. In the 
accompanying table the results of this method 
for the years 1902 and 1912 are shown. 

By reference to the table it is seen that the 
firemen produced in 1912 over two billion and 
a quarter traffic units, while in 1902 they pro- 
duced about one billion and a half. Their 
productivity from 1902 to 1912 increased, 



INCREASED PRODUCTIVE EFFICIENCY 151 

1902 1912 

Total traffic units 79,617,187,610 131,898,353,435 

Income from all 

sources $1,769,447,408 $2,995,596,275 

Income per traf- 
fic unit $.0222 $.0227 

Total expenses. . . $1,439,254,172 $2,643,321,113 

Cost per traffic 

unit $.0181 $.0200 

Net income per 

traffic unit .... $.0041 $.0027 

Traffic units pro- 
duced by ex- 
pense factors.. 64,728,773,536 116,445,864,009 
(81.3%) (88.2%) 

Compensation of 
firemen (per 
cent of total 
expenses) .0234 .0231 

Traffic units pro- 
duced by fire- 
men 1,514,653,300 2,375,499,459 

Contribution of 
firemen to net 
income $6,210,079 $6,413,849 

therefore, by three quarters of a billion traf- 
fic units. The net income per traffic unit in 
1912, however, was only twenty-seven hun- 
dredths of a cent, whereas in 1902 it amounted 
to forty-one hundredths of a cent, and there- 
fore, although the firemen produced more 
traffic units in 1912 than in 1902, the value 
of these to the railways was very little more 
in the latter year, the figures being about 
$6,414,000 in 1912 and $6,210,000 in 1902. 



152 DETERMINATION OF RAILWAY WAGES 

The increased productive efficiency of the fire- 
men, then, meant only a $200,000 advance 
in income, and the amount is all that the 
firemen can claim in revenue gains. Even 
assuming, then, that the employees should 
share in revenue gains resulting from the in- 
creased productive capacity of the train ma- 
chine, and assuming again that they should 
participate in gains in the proportion that 
their cost bears to total costs, it is seen that 
the firemen could claim only a negligible fig- 
ure as their share in the gains. 

The method described above takes ac- 
count of every factor in production, and in 
this respect, is much fairer than the method 
proposed by the employees. Yet it is based 
upon the arbitrary assumption that factors 
should participate in income according to the 
ratio of their costs to total expenses. There 
is no reason why such a ratio should be the 
measure of the income attributable to the 
factors. It might easily happen that in- 
creased taxes would raise the total of ex- 
penses to so high a figure that the ratio of 
firemen's compensation to total expenses 
would be lowered to such a point as to show 
no revenue gain, or even a loss, attributable 
to them. The above method, also, seeks 
merely to determine the amount of income 
due to all firemen; the distribution of this 



INCREASED PRODUCTIVE EFFICIENCY 153 

sum to passenger, through and local freight 
firemen, etc., according to the increased pro- 
ductive efficiency of each class within that 
grade of employment would require addi- 
tional arbitrary assumptions and complicated 
calculations. As yet no method has been de- 
vised which can fairly resolve the joint prod- 
uct into its elements and attribute certain 
portions of the product to the productivity 
of certain factors. Until this is accomplished, 
it is impossible to measure the respective 
contributions of the factors of production to 
increased output. 

The principle of increased productive effi- 
ciency, as the employees conceive it, that is, 
participation in revenue gains according to 
specific contribution to increased output, 
therefore, cannot be accepted as a valid basis 
of wage advance; for the claim that employ- 
ees contribute to increased output resulting 
from the improved train machine is unsub- 
stantiated, and even if that claim were sub- 
stantiated, the lack of a proper method of 
calculating specific contributions to increased 
output precludes any possibility of applying 
the principle in arbitration proceedings. 

Increased productive efficiency, however, 
presents a basis for wage advances, not on 
the ground that the employees' productivity 
is increased to a measurable extent by operat- 



154 DETERMINATION OF RAILWAY WAGES 

ing an improved machine, but on the ground 
that where profits are advancing as a result of 
the introduction of improved machinery, so- 
ciety may be benefited through a general ad- 
vance in the wages of labor, attended with 
the least amount of friction between em- 
ployers and employees and with the least 
chance of additional burden upon the public. 
There is virtual agreement among econo- 
mists and investigators that a great part of the 
labor force of the country is receiving a wage 
below the amount commonly estimated as the 
requisite of a normal standard of living. Any 
betterment in the laborers' condition, there- 
fore, when such betterments can be effected 
without friction, is socially advantageous. 
No opportunity should be lost to increase 
wages and to advance the standard of living 
of any grade of employees at a time when a 
wage increase can be made without placing a 
direct burden upon the industry concerned 
and upon the public. Arguments based on the 
principle of increased productive efficiency 
presuppose increasing revenues from year to 
year arising out of the introduction of more 
efficient machinery. Therefore, in those in- 
dustries in which improved machinery is put 
into operation, wage advances may be granted 
without endangering the stability of the in- 
dustry and without shifting the amount of the 



INCREASED PRODUCTIVE EFFICIENCY 155 

wage increase upon the public in the form of 
higher prices. A wage advance made at such 
times would reduce the friction between em- 
ployers and employees usually engendered 
by a demand for increased compensation, and 
would be a social benefit in that the standard 
of living of the employees involved is raised 
to a higher level. 

This application of the principle of in- 
creased productive efficiency as a basis of 
wage advance concerns all employees, whether 
or not the introduction of improved machinery 
directly affects their particular occupation. 
The entire mass of labor in any particular 
industry may properly demand a share in 
industrial progress ; but skilled employees, on 
account of the fact that they are usually bet- 
ter organized than unskilled, and that im- 
proved machinery is more likely to affect 
their occupations directly, seem to stand a 
better chance of securing a wage advance 
based on increased productive efficiency. If 
this be so, the principle, it may be urged, bene- 
fits skilled labor at the expense of unskilled. 
There is every probability, however, that 
an advance in the standard of living of one 
grade of employment will, sooner or later, 
be reflected in the standards of other grades 
within the industry concerned. The setting 
of a new and higher standard of living for any 



156 DETERMINATION OF RAILWAY WAGES 

one grade of labor acts as a goal towards 
which other grades instinctively tend to 
reach. A wage increase to one grade is usually 
followed by a corresponding collateral in- 
crease throughout the industry, for the main- 
tenance of the relative differentials between 
grades of labor is strongly ingrained in every 
class of workmen. It may be said, therefore, 
that a strict application of the principle of 
increased productive efficiency, in the long 
run, will benefit all grades of labor in the in- 
dustry in which improved machinery is in- 
troduced. 

Nor does it follow, as employers have fre- 
quently claimed, because wages have been 
advanced on the basis of increased produc- 
tive efficiency that they should be decreased 
when the large revenues accruing from the 
introduction of more efficient machinery be- 
gin to decline. A wage advance based on 
increased productive efficiency is in no sense 
a variable amount determined yearly by the 
size of the profits earned by the industry or 
business unit. The increase in wages on this 
principle is fixed and permanent, and once 
the new standard of living has been set, its 
maintenance should be the paramount con- 
sideration. 

In conclusion, then, a permanent wage ad- 
vance may be based upon the principle of in- 



INCREASED PRODUCTIVE EFFICIENCY 157 

creased productive efficiency, not because of 
the existence of a definite, measurable rela- 
tion between labor and the increased out- 
put arising from the introduction of more 
efficient machinery, but because it is socially 
expedient to better the condition of labor, 
when such betterment may be effected with 
least friction between employers and em- 
ployees, and with least chance of passing on 
the wage advance to the public by increasing 
the prices of commodities. 

The employees' argument for wage ad- 
vances based on increased labor, risk, and 
responsibility is much less confused than that 
based on the principle of increased produc- 
tive efficiency. The chief wage determinants 
which employers are supposed to use in fix- 
ing the amount of compensation due for any 
given occupation are the degree of skill, and 
the amount of physical labor required, the 
risk and responsibility involved, and the ad- 
vantages or disadvantages peculiar to the 
particular kinds of work. When any change 
in the manner of conducting the industry 
occurs by which a corresponding change ap- 
pears in these wage determinants, wage ad- 
vances or decreases based upon these changes 
seem fair. For instance, if the organization of 
section hands on the railways is altered by a 



158 DETERMINATION OF RAILWAY WAGES 

lengthening of sections and the introduction 
of efficiency methods by which the amount of 
physical labor and mental strain is increased, 
wage advances based on such alterations in 
the nature of the occupation may be fairly 
demanded. Similarly, if it can be proved that 
various labor saving devices and better sig- 
naling apparatus have lessened the physical 
labor and responsibility of engineers, then 
a demand on the part of the railways that 
engineers' wages be proportionately reduced 
should be given careful consideration. 

It is evident that wage demands based upon 
increased labor, risk, and responsibility may 
be brought forward by all grades of railway 
employees, for any occupation may conceiv- 
ably be affected by a change in some one of 
these elements of wage determination. The 
most rapid and obvious changes, however, 
take place in those occupations in which im- 
proved machinery is more readily introduced, 
and on the railways train service has under- 
gone in recent years an almost startling al- 
teration, due to the substitution of more 
powerful locomotives, electric engines, steel 
coaches, automatic couplers, air brakes, and 
numerous other mechanical appliances. The 
train service employees, of course, — the en- 
gineers, firemen, conductors, and brakemen, 
etc., — have been more directly affected by 



INCREASED PRODUCTIVE EFFICIENCY 159 

these changes in the train machine than any- 
other grades of railway labor, and for this 
reason, increased labor, risk, and responsibil- 
ity as a basis of wage advance have figured 
prominently in their demands. The conduc- 
tors and trainmen hold that there is a cer- 
tain amount of labor and degree of respon- 
sibility and hazard connected with every 
train movement. If the units comprising this 
train are increased, then these elements of 
labor, risk, and responsibility are propor- 
tionately increased. With every advance in 
the size of freight or passenger cars and trains, 
the conductors and trainmen have a greater 
number of passengers, or a larger and more 
valuable freight load in their charge. 1 The 
firemen claim that the introduction of larger 
locomotives necessitates more labor in con- 
nection with firing, 2 and the engineers assert 
that larger engines have increased their 
labor, because the mechanism is more com- 
plicated. In addition, the larger trains in use 
require greater skill in stopping and starting, 
and the increasingly heavier traffic, faster 

1 Eastern Conductors and Trainmen's Arbitration (1913), Pro- 
ceedings, Vol. in, p. 9. 

2 Western Firemen and Enginemen's Arbitration (1910), Pro- 
ceedings, pp. 2913-2914 ; Denver and Rio Grande Arbitration (1910), 
Proceedings, pp. 26, 1426; Eastern Firemen's Arbitration (1913), 
Supplemental Report of International President, p. 413; Western 
Engineers and Firemen's Arbitration (1915), Employees' Brief, p. 
73. 



160 DETERMINATION OF RAILWAY WAGES 

speed, and greater number of signals have 
served to increase the engineers' responsi- 
bility to a great degree. 1 

The railways concede that when progress 
in railroading brings about changes by which 
added labor and responsibility are imposed 
upon employees, any tangible increase in this 
burden should be reasonably reflected in the 
amount of compensation. 2 It is claimed, how- 
ever, that the labor, risk, and responsibility of 
employees have been decreased, or increases 
have been offset, by improvements. Thus, 
engineers are said to have less work, hazard, 
and responsibility on account of the installa- 
tion of air brakes, improved lubricators, auto- 
matic sanders and bell-ringers, and the im- 
provement in roadbeds, rails, and signaling 
apparatus. 3 In the case of firemen, the roads 
contend that the introduction of superheaters 
and mechanical stokers has decreased fuel 
consumption, and consequently, the amount 
of labor performed. 4 Again, the roads argue 
that the actual labor and responsibility of 

1 Eastern Engineers' Arbitration (1912), Proceedings, p. 12; Chi- 
cago and Western Indiana, etc., Arbitration (1913), Minutes, 
Vol. ii, pp. 1317, 1398-1399; Western Engineers and Firemen's 
Arbitration (1915), Employees' Brief, p. 73. 

2 Western Engineers and Firemen's Arbitration (1915), Rail- 
ways' Brief, p. 2. 

3 Eastern Engineers' Arbitration (1912), Railways' Brief, pp. 
46-47. 

4 Eastern Firemen's Arbitration (1913), Railways' Brief, pp. 
6-7. 



INCREASED PRODUCTIVE EFFICIENCY 161 

the conductors and trainmen are lessened by 
the adoption of air brakes, automatic couplers 
and signals, the elimination of train orders 
on those portions of the road operated by 
signal indicators, and the placing of an addi- 
tional man on many trains as a result of Full 
Crew Laws. 1 Thus, the railways are willing 
to grant advances in pay to train service and 
other employees in order to compensate for 
increased labor, risk, and responsibility, pro- 
vided it is proved that these elements have 
not been affected by the introduction of labor- 
saving machinery and improved mechanical 
appliances. 

American arbitration boards agree upon the 
principle that any increase in skill, risk, or re- 
sponsibility by reason of the use of improved 
machinery should be reflected in the com- 
pensation of the employees concerned. The 
Eastern Engineers' Board (1912) recognized 
the responsibility, skill and efficiency, mental 
strain and hazard of the engineers, and agreed 
that the compensation of this grade of em- 
ployees should be adequate to cover these 
factors. 2 In the case of the Switchmen 
against the Chicago Terminal companies, the 
board found that the skill required of switch- 

1 Eastern Conductors and Trainmen's Arbitration (1913), Rail- 
ways' Brief, pp. 7, 26. 

2 Eastern Engineers' Arbitration (1912), Report of Board, pp. 
19-20. 



162 DETERMINATION OF RAILWAY WAGES 

men had become greater, 1 and the Eastern 
Conductors and Trainmen's Board (1913) 
ruled that since the responsibility of con- 
ductors had been increased by the introduc- 
tion of larger trains, they should receive a 
greater advance than that granted to brake- 
men, upon whom the responsibility of a 
larger train did not rest. The same board, 
however, held that the claim of increased 
labor should be disallowed, because the sub- 
stitution of steel for wood in car construction 
and the use of various safety appliances 
served to offset the claim for increased labor. 2 
The attitude of the boards may be charac- 
terized as in practical agreement with the 
principle involved in wage demands on the 
basis of increased labor, risk, and responsi- 
bility, with the recognition of the fact, how- 
ever, that modern mechanical inventions may 
act as an offset to any increase in these 
factors. 

Increased labor, risk, and responsibility as 
the basis of wage advance, then, have been 
urged by the employees, conceded by the rail- 
ways, and applied by arbitration boards — 
their acceptance is virtually unanimous. If 
it can be proved that various labor-saving 

1 Switchmen's Arbitration (1910), Report of Board, Records, U.S. 
Board of Mediation and Conciliation, File No. 25. 

2 Eastern Conductors and Trainmen's Arbitration (1913), Re- 
port of Board, pp. 19-21. 



INCREASED PRODUCTIVE EFFICIENCY 163 

devices, mechanical inventions, etc., have 
not in other directions effected an offset to 
increased labor and responsibility, or have 
not served actually to decrease such labor 
and hazard, then there is no reason why 
wage advances on this basis should not be 
granted. 

On account of the fact that increases in 
labor, risk, and responsibility are more likely 
to occur in those occupations connected with 
the operation of trains than in other grades of 
railway employment, it may be argued that 
there is a tendency for wage advances based 
on this principle to work to the disadvan- 
tage of other railway labor. The railways 
have claimed that the demands of the train- 
service employees are unfair to other labor, 1 
and the dissenting opinion in the Georgia 
and Florida Arbitration (1914) strongly con- 
demned the engineers and firemen for ask- 
ing an advance which would necessitate a 
reduction in the pay of other employees. 2 
There is a prevalent impression that the com- 
pensation of the train-service employees is 
out of proportion to that paid to other grades 
of railway labor, and that recent wage ad- 
vances to the members of the brotherhoods 
have been made at the expense of telegra- 

1 Eastern Firemen's Arbitration (1913), Railways' Brief, p. 62. 

2 Georgia and Florida Arbitration (1914), Report of Board, p. 13. 



164 DETERMINATION OF RAILWAY WAGES 

phers, maintenance of way men, and others. 1 
It is certain that the wages of the train-serv- 
ice employees during the last decade have in- 
creased more rapidly than the wages of other 
railway workmen, but it is not at all certain 
to what influence this has been due. It may 
be accounted for by the more obvious or 
greater relative increases in labor, risk, and 
responsibility; by the standardization move- 
ment which has been undertaken on a larger 
scale by the train-service employees, and 
which always involves an upward move- 
ment of the standard rate; or it may be 
ascribed to the superior organization of the 
four brotherhoods. The employees, both 
skilled and unskilled, claim that the strong 
organization and consequent superior bar- 
gaining power of the train-service employees 
have secured their relatively greater in- 
creases, and there have been pleas by unor- 
ganized or weakly organized railway labor to 
the brotherhoods for an indorsement of their 
demands, 2 and even a suggestion of a defen- 
sive and offensive alliance of all the employees 
on the railways. 3 
, Whatever the real cause of the widening 

1 Proceedings of the American Economic Association, 1914, 3d 
Series, Vol. viii, No. 1, p. 46; Advanced Rate Hearings (1910), S. 
Doc. No. 725, 61st Congress, 3d Session, Vol. vi, p. 4366. 

2 Locomotive Firemen and Enginemens Magazine, April, 1907, 
pp. 545-546. 

» Ibid., March, 1910, p. 414. 



INCREASED PRODUCTIVE EFFICIENCY 165 

of the differential between skilled and un- 
skilled labor, it cannot be held that the teleg- 
raphers, station agents, section hands, etc., 
would have received greater advances, had 
not the train-service employees been so suc- 
cessful in obtaining their demands. This 
position would assume the existence of a defi- 
nite wage fund destined to be apportioned 
among the various grades of railway labor in 
the form of wage increases, with the result 
that one grade's gain would be the others' 
loss. Such a fund has never existed. It is 
hardly unjust to the railways to say that they, 
like other employers, rarely pay more to their 
labor than they are forced to, and for this 
reason, the widening of the differential be- 
tween the train-service and other employees 
must be attributed, not to the diversion of 
the just increases of the latter to the more 
skilled group, but to the relatively stronger 
strategic position of the train-service em- 
ployees as a consequence of their more highly 
developed organization. 1 

Indeed, there is every likelihood that the 
existence of a powerfully organized and 
highly paid group of labor in any industry — ■ 
such as the engineers and conductors in rail- 
way transportation — far from being detri- 

1 Eastern Engineers' Arbitration (1912), Employees' Brief, p. 17: 
Western Engineers and Firemen's Arbitration (1913), Proceed- 
ings, pp. 7782-7783. 



166 DETERMINATION OF RAILWAY WAGES 

mental, may, in the long run, be beneficial to 
the interests of the unorganized and low-paid 
workmen. There is a tendency among the 
employees engaged in any industry to keep 
a close watch on the wages paid to other 
grades of their fellow workmen, and the dif- 
ferential between their wage and that of 
some other grade of employment is jealously 
guarded. Thus, on the railways, wage in- 
creases usually move in cycles, an advance 
to engineers being followed at a close interval 
by an equivalent advance to firemen, con- 
ductors, and trainmen. Existing differentials 
are more jealously maintained among the 
train-service employees than among other 
railway workers, but that the latter do aim 
to maintain their relative level below the 
skilled groups is evidenced by their refer- 
ences in arbitration proceedings to the ad- 
vances made to train-service employees and 
by their claims to proportionate advances. 1 
Thus, an increase in the wages of a highly 
paid group of employees, on account of this 
tendency to maintain existing differentials, 
tends to put in motion a cycle of wage ad- 
vances extending to all grades of labor in the 
industry. Therefore, an increase in wages to 
train-service employees, based on increased 

1 Southern Railway Arbitration (1913), Report of Board, pp. 
15-18; Wheeling and Lake Erie, etc., Arbitration (1914), Pro- 
ceedings, pp. 153-156. 



INCREASED PRODUCTIVE EFFICIENCY 167 

labor, risk, and responsibility arising from 
the improved train machine, or on any other 
principle of wage advance applicable only to 
those grades of railway labor, may ultimately 
result in an advance in the wages of the un- 
organized or poorly organized employees. 



CHAPTER V 

PRINCIPLES GOVERNING THE ARBITRAL 
DETERMINATION OF WAGES 

The purposes of this final chapter is to com- 
bine the conclusions reached in the preceding 
pages and with their aid to suggest some 
principles which may govern the determina- 
tion of wages, not only in railway arbitra- 
tion but also in the settlement of disputes 
involving employees in other industries. The 
bases of standardization, the living wage, the 
increased cost of living, increased productive 
efficiency, and increased labor, risk, and re- 
sponsibility have been considered as isolated 
principles. In this chapter stress will be laid 
more upon the applicability of these princi- 
ples considered as a whole. The three prob- 
lems which commonly confront arbitration 
boards dealing with wage matters are the fol- 
lowing: (I) What is the test of the adequacy 
of the wages received by any given grade of 
employees? (II) What principles should prop- 
erly govern the advance in wages? (Ill) What 
effect should the claim of inability to pay 
increases have upon wage advances? The 
succeeding paragraphs will treat these ques- 
tions in the order named. 



PRINCIPLES OF ARBITRATION 169 

I. The Adequacy of Wages 

It is impossible to approach the question 
of adequacy without some conception of a 
system of wages which may be used as a 
standard to which existing wages may be 
compared. The wage system in any indus- 
try or in any particular business unit may be 
considered as a structure with the wages paid 
the lowest grade of employees as the foun- 
dation, surmounted by successively higher 
levels representing the various grades of 
skilled labor. The foundation wage is called 
here the primary wage; the increasingly 
higher levels are termed secondary wages. 
The amount of differential between the un- 
skilled and any grade of skilled labor is 
simply the difference between the secondary 
wage of the latter and the primary wage. If 
the industry or business unit is paying a 
standard rate to each occupation, the primary 
wage is the standard rate of the lowest grade 
of employees, and the standard rate of each 
of the skilled occupations represents the sec- 
ondary wage of that occupation. If a stand- 
ard rate is not in force, the average wage of 
each occupation must be regarded as the 
measure of the primary or secondary wage. 
Skilled grades of employment receive a favor- 
able differential over unskilled on account of 



170 DETERMINATION OF RAILWAY WAGES 

the greater skill, efficiency, hazard, and re- 
sponsibility, etc., involved in their occupa- 
tions; and the amount of this differential is 
largely, though not entirely, a matter of cus- 
tom and usage. The conception of a differen- 
tial wage is not purely theoretical nor fanci- 
ful, for it is used in wage determinations in 
Australasia, 1 and, as pointed out in the chap- 
ter on increased productive efficiency, all 
employees keep a close watch on their dif- 
ferential with a view to the maintenance of 
their position relative to other employees in 
the same industry. 

The requisites for a construction of a fair 
differential wage system, then, are an esti- 
mate of the amount of compensation due the 
lowest grade of unskilled labor as a minimum, 
and an estimate of the proper differential 
above the minimum for each grade of skilled 
labor in the industry concerned. 

The differentials at present existing be- 
tween the primary wage and secondary wages 
are not necessarily the proper amounts com- 
mensurate with the greater skill, risk, etc., 
of skilled employees. As noted above, there 
is a tendency for secondary wages to draw 
away from the primary wage, counteracted 
in some degree, it is true, by the weaker tend- 

1 H. B. Higgins, "A New Province for Law and Order," Har- 
vard Law Review, Vol. xxix, No. 1, pp. 15-17. 



PRINCIPLES OF ARBITRATION 171 

ency of secondary wage advances to be re- 
flected in primary wages. This widening of 
differentials was ascribed to three causes, 
— the greater relative increases in labor, 
risk, and responsibility of the skilled groups, 
the influence of the upward standardization 
movement, and the superior bargaining power 
of the more strongly organized skilled em- 
ployees. The latter cause is undoubtedly the 
most influential. Proper differentials, there- 
fore, are differences between wages which 
have been determined under precisely similar 
conditions; that is, the differences between 
the present secondary wages and a primary 
wage, determined on the assumption that 
the lowest grade of labor has had the advan- 
tage of powerful organization, or the differ- 
ences between the present primary wage and 
secondary wages determined on the assump- 
tion that the skilled employees have lacked 
the advantages of organization. 

In the present wage system of any indus- 
try or business unit, the proper differential 
may be secured either by a reduction in sec- 
ondary wages by the required amount, or by 
an increase in the primary wage. In the pre- 
ceding pages, it was held that there were two 
determining considerations in respect to wages, 
the payment of a living wage to the lowest 
grade of employees, and the maintenance of 



172 DETERMINATION OF RAILWAY WAGES 

the standard of living of all employees. A 
reduction in secondary wages, therefore, must 
be eliminated, for such action, apart from the 
unrest inevitably resulting, would reduce the 
standard of living of skilled employees. The 
latter alternative, increasing the primary 
wage, must be accepted. Since the lowest 
grades of workmen, in a majority of cases, 
are receiving compensation below the living 
wage level, and since their aim from the first 
has been to secure a living wage, it is fair to 
assume that with a strong organization they 
would have obtained that amount. A system 
of wages constructed with a primary wage 
sufficient to secure a normal standard of liv- 
ing and with secondary real wages kept at 
their present level, since the differentials over 
the increased primary wage are thus set at 
their proper height, satisfies the requirements 
that the lowest grade of labor receive a living 
wage, and that the standard of living of all 
grades of labor be maintained. A differential 
system of wages so constructed is advanced 
as the standard to which existing wages may 
be compared as a test of their adequacy. 

The two fundamental principles which may 
fairly govern the wage determinations of 
arbitrators are the grant of a living wage to 
unskilled labor, and the maintenance of the 
standard of living of all employees. The first 



PRINCIPLES OF ARBITRATION 173 

of these is the more important, since, with 
the upper grades of labor, there is no ques- 
tion of their securing enough to insure a de- 
cent standard of living. With this in mind, 
therefore, the test of the adequacy of wages 
paid to unskilled employees is as follows: 
Are the lowest grade of employees receiving 
as a minimum a living wage determined ac- 
cording to the costs of food, rent, clothing, 
etc., at this particular time and place? If 
they are not, the wage received is inade- 
quate, and must be increased by such an 
amount as to enable the unskilled laborer to 
secure a normal standard. 

As to the adequacy of the wages paid to 
the various grades of skilled labor, the first 
test is the adequacy of the wages received 
by the unskilled in the same industry or busi- 
ness unit. If these workmen are not receiv- 
ing a living wage, the test of the adequacy 
of the wages paid to skilled employees is as 
follows: Have the wages of this particular 
grade of labor been reduced as a result of an 
increase in the cost of living since the last 
wage adjustment? If the wages have been so 
reduced, then they are inadequate, and must 
be increased by such an amount as to enable 
the skilled laborers concerned to maintain 
their former standard of living. If, however, 
there has been no increase in living costs, and 



174 DETERMINATION OF RAILWAY WAGES 

if the unskilled employees in the same indus- 
try or business unit are paid compensation 
below the living wage, then existing skilled 
wages must be considered adequate. 

In arbitration proceedings, therefore, pref- 
erence must be given to the demands of un- 
skilled employees receiving less than a living 
wage, every attempt being made to decrease 
the widening differential between the primary 
and secondary wages by greater proportion- 
ate increases to unskilled labor. To this grade 
of labor every concession in respect to wages 
must be granted until the living wage level 
is reached, and until that level is reached no 
advance should be awarded to skilled grades 
except on the basis of the increased cost of 
living. This advance is necessary to maintain 
the standard of living. The adoption of such 
a policy by arbitration boards would work 
no hardship to any one grade of labor; un- 
skilled men would gradually approach a 
normal standard of living, and skilled men 
would have their present standard of living 
protected. 

The general application of the principle of 
standardization to the wage payments of all 
employees would greatly simplify the adop- 
tion of the differential system of wages de- 
scribed above. The award of a living wage 
to the unskilled employees would establish 



PRINCIPLES OF ARBITRATION 175 

a minimum and tend to equalize rates of pay 
for that grade in the area involved, but it 
would be a difficult matter to determine the 
amount of the differential above this mini- 
mum for skilled occupations in which a great 
diversity of rates existed either within or as 
between business units. The principle of 
standardization is designed to abolish within 
a given area the multiplicity of rates paid 
for similar service by the application of one 
standard rate for each occupation, minor 
differences in the nature of the work, due to 
varying physical and other conditions, being 
disregarded. The adoption of this principle 
by arbitration boards would render the deter- 
mination of the exact amount of the differen- 
tial between various grades of labor simple in 
comparison with a determination based upon 
the average wages of each grade. If changes 
in the nature of an occupation called for an 
increase or decrease in the differential above 
the minimum paid to unskilled labor, such 
changes could be readily reflected in a stand- 
ard rate, whereas, with the existence of a 
diversity of rates, the difficulty would be 
great. For this reason, and also on account 
of the comparative ease of applying general 
principles of wage advance, in addition to 
the other advantages mentioned above, there 
seems to be sufficient warrant for the appli- 



176 DETERMINATION OF RAILWAY WAGES 

cation of a standard rate in the case of the 
wages of all employees, and over as large an 
area as practicable. 

In applying this principle, however, arbi- 
tration boards are limited by the area cov- 
ered in the wage dispute to be settled by the 
award. This area may vary in size from a sin- 
gle business unit to all the units of a given 
industry throughout the country. The extent 
of the area depends mainly upon the degree 
of centralization in the union to which the 
employees belong. Unorganized or weakly 
organized laborers are less likely to secure 
standard rates over a large area than are 
members of powerful, centralized unions. 
Arbitration boards, however, could aid the 
weaker employees to secure standardization 
if the awards in disputes involving single 
units where the same grade of employees is 
concerned were made to conform with each 
other as closely as circumstances permit, pro- 
vided, of course, that the award used as a 
basis is not a compromise decision. District 
standardization is the most that can be hoped 
for at the present time, except for such ex- 
ceptionally powerful organizations as the rail- 
way brotherhoods, where there is a strong 
tendency toward national uniformity. 

The principles of standardization and the 
living wage must be looked to in order to 



PRINCIPLES OF ARBITRATION 177 

secure the differential wage system suggested. 
Standardization establishes one standard rate 
for each grade of labor over a given area and 
temporarily fixes the amount of the differ- 
entials between grades of employment. The 
living wage secures a normal standard of liv- 
ing for the lowest grade of employees, and is 
justified by the fact that the present differ- 
entials between unskilled wages and those 
paid skilled grades are greater frequently 
than the differences in skill, risk, and re- 
sponsibility call for; that a number of un- 
skilled workmen are receiving a wage insuf- 
ficient to secure decent livelihood, and that 
payment below the living wage level consti- 
tutes a social evil. Until the lowest standard 
rate is equivalent to a living wage, the rates 
of other grades of employees must be kept 
at the level required to maintain their pres- 
ent standard of living. The absolute amount 
of the standard rate for each grade of em- 
ployees within the area should vary only on 
account of differences in living costs between 
sections of the area, the aim being equality 
of real wages. 

II. Principles governing Wage Advances 

On the assumption that the lowest grade 
of labor in the business unit or industry is re- 
ceiving a living wage, the following princi- 



178 DETERMINATION OF RAILWAY WAGES 

pies of wage advance may be applied to all 
grades of employment, skilled and unskilled 
alike: (1) increased cost of living; (2) in- 
creased labor, risk, and responsibility; (3) in- 
creased productive efficiency. 

(1) The principle of the increased cost of 
living is designed to maintain the standard 
of living. Since the standard of living de- 
pends in the main upon the amount of income 
received and the costs of commodities, an 
increase in the latter without a correspond- 
ing increase in the former is tantamount to 
a reduction in wages and in the standard of 
living. The maintenance of the standard of 
living is of utmost importance to society, and 
for this reason it is imperative that wages 
should advance in the same proportion as liv- 
ing costs increase. By the cost of living is 
meant not only the cost of food, but also the 
costs of rents, clothing, fuel and light, and 
sundries. 

The increased cost of living principle of 
wage advance is applicable to all employees 
of every grade. The actual advance in living 
costs, however, may vary for the different 
grades of employment on account of the un- 
equal percentages of total income spent for 
food, clothing, etc., by those receiving dif- 
ferent amounts of income. This principle is 
applicable also in either single or concerted 



PRINCIPLES OF ARBITRATION 179 

movements. In the latter, by reason of the 
extensive territory involved and of fluctua- 
tions in the cost of living for different sec- 
tions of the area, arbitrators sometimes hesi- 
tate to apply a single percentage of increase 
to wages. There seems to be no real injustice 
done, however, if the average increase in the 
cost of living for the area concerned be taken 
as the measure of the advance in wages. If 
possible, a refinement might be made by a 
subdivision of the area and a separate de- 
termination of the different increases in liv- 
ing costs for each of these subdivisions. 

The claim of employers that if wages are 
advanced in the same proportion as the in- 
crease in the cost of living they should like- 
wise be decreased in the same proportion as 
living costs decline should not be allowed. 
In the past, wage reductions during long con- 
tinued periods of declining prices have been 
vigorously opposed by employees, and the 
result has been a decrease in wages by a some- 
what smaller ratio than the decrease in prices. 
Arbitration boards should endeavor to raise 
the standard of living of employees whenever 
possible, and this result can be obtained dur- 
ing periods of declining prices by a refusal to 
allow decreases in wages equal to the decline 
in prices, without the likelihood of friction 
between employers and employees, and with- 



180 DETERMINATION OF RAILWAY WAGES 

out going counter to the normal trend of 
wages during long periods of declining prices. 

(2) Since the labor, risk, and responsibility 
involved in any occupation are the usual 
determinants of the amount of wages paid, 
any increase in these elements demands a 
corresponding increase in the wage. The 
amount of wage advance due to increases in 
labor, risk, and responsibility must be esti- 
mated arbitrarily, for there is no exact unit 
for the measurement of these factors. In- 
creased labor, risk, or responsibility as a basis 
of wage advance is applicable to all employees, 
both skilled and unskilled. It may be argued 
that as the living wage has been suggested 
as the basis of wage payment to unskilled 
labor, these factors of labor, risk, and re- 
sponsibility do not properly enter into the 
determination of their wage. The living 
wage, however, is the amount due for the 
minimum of skill, labor, risk, and responsi- 
bility, and any increase in these must be 
added to the living wage compensation. 

Since the degree of skill, labor, risk, and 
responsibility usually influences the height 
of the differential paid skilled labor above 
the wage of the unskilled, any increase in 
these factors for a given grade of skilled labor 
operates to change its existing differential. 
As changes in labor, risk, and responsibility 



PRINCIPLES OF ARBITRATION 181 

are most likely to occur in skilled groups in 
which modern mechanical appliances pro- 
duce the most noticeable effects, the result of 
the application of this principle will be a 
widening of the differential of the skilled 
grades over the unskilled. There are several 
influences, however, which may tend to keep 
the differential amounts constant. Thus, the 
introduction of various labor-saving and 
safety devices in one set of operations con- 
nected with a skilled occupation may serve 
to lessen or to offset increases in labor or risk 
in another set of operations. A more definite 
check upon an increase in the differentials 
favoring skilled labor is that wage advances 
to the lower paid employees based on the 
increased cost of living are likely to be greater 
than similar advances to men high up in the 
scale of compensation. This happens on ac- 
count of the fact that food, the commodity 
ordinarily showing the greatest advance in 
price, constitutes a larger item of expenditure 
for small incomes than for large ones. Thus, 
a strict application of the principle of the in- 
creased cost of living to unskilled employees 
and a recognition of reductions or offsets in 
increased labor, risk, and responsibility of 
skilled employees by the adoption of labor- 
saving and safety devices may serve to keep 
the differentials between skilled and un- 



182 DETERMINATION OF RAILWAY WAGES 

skilled occupations constant. There is no rea- 
son, however, for maintaining differentials if 
changes in the nature of an occupation call 
for an increase or decrease in the amount of 
compensation above the living wage. Ad- 
vances based on the increased labor, risk, and 
responsibility principle tend to keep the dif- 
ferentials between various grades of labor at 
their proper level. 

(3) In the chapter on increased productive 
efficiency it was held that participation in 
revenue gains according to specific contribu- 
tion to output was not a valid principle of 
wage advance, but that wage advances might 
with propriety be made during periods in 
which the particular business unit or indus- 
try was enjoying increasing revenues from 
year to year, due to the introduction of im- 
proved methods of production. Wage ad- 
vances on this principle are designed to give 
the employees some share in industrial prog- 
ress and are based on social expediency. It 
is natural for employees to consider them- 
selves entitled to an increase in wages at 
those times when the industry employing 
them is reaping large profits, especially when 
the employees are operating the machines 
which make increased profits possible. At 
such periods wage advances can be made 
without direct injury to the industry and 



PRINCIPLES OF ARBITRATION 183 

without the necessity of passing on the ad- 
vance to the public in the form of higher 
prices. Society will be thus benefited by the 
removal of any tendency on the part of the 
employees to strike and by the improved 
standard of living resulting from an increase 
in wages. In periods of intense business ac- 
tivity and increased demand for the commod- 
ity produced, when profits increase by leaps 
and bounds, wage advances may be granted 
on the same basis of social expediency. A 
concrete illustration of the application of 
this principle is given by the recent wage 
increases granted by munition manufactur- 
ers as a result of the immense profits earned 
by trade with belligerents. 

Wage advances based on the principle of 
increased productive efficiency are applicable 
to all employees within the unit or industry, 
and the division of the total amount to be 
apportioned should be equal. The determi- 
nation of the proper amount to be thus dis- 
tributed must be, of course, on an arbitrary 
basis. Claims of employers that if the men 
share in industrial progress they should also 
bear the burden of any retrograde movement 
in industry should be disallowed, for a wage 
advance on the principle of increased pro- 
ductive efficiency is to be regarded as per- 
manent, since the proposed reduction would 



184 DETERMINATION OF RAILWAY WAGES 

affect the employees' standard of living for 
the worse. 

The question may arise as to whether the 
three bases of wage advance outlined above 
are cumulative in their application. Should 
the percentage or amount of increase deter- 
mined as correct for each of the above be 
added and applied to the existing wage, or 
should the largest only be applied, the others 
being included in that one percentage or 
amount? This question may be answered by 
considering the ultimate basis for each spe- 
cific increase. A wage advance on the principle 
of the increased cost of living serves merely 
to maintain the standard of living, and wages 
should be advanced by the amount of the 
increase in living costs as a minimum. If ap- 
plied to all wages alike, the relative standard 
of living of the various grades would be un- 
changed. It may happen, however, that a 
change is warranted in some existing dif- 
ferential on account of a greater or less de- 
gree of labor, risk, or responsibility involved 
in a particular occupation, and advances 
based on an increase in labor, risk, or respon- 
sibility serve to bring about this change and 
to keep differentials at their proper level. The 
latter advance, therefore, would not be in- 
cluded in the advance on the basis of the in- 
creased cost of living. A wage advance on the 



PRINCIPLES OF ARBITRATION 185 

principle of increased productive efficiency 
affords an opportunity to employees to par- 
ticipate in industrial progress; that is, their 
standard of living is to be raised by an ad- 
vance in addition to what the mere mainte- 
nance of the standard of living calls for. Such 
a wage advance, therefore, is to be entirely 
separated from the other two bases. The 
three wage principles, increased cost of liv- 
ing, increased labor, risk, and responsibility, 
and increased productive efficiency are con- 
sequently separate and distinct, and all three 
may be fairly applied in a single arbitration 
award, the total amount of increase to be finally 
added to the existing wage being determined 
by the sum of the increases deemed proper. 

The strict application of the above men- 
tioned bases of wage advance will operate 
not only to secure a living wage for the low- 
est grade of employees and the maintenance 
of the standard of living, but also an advance 
in the living standards of all grades of labor. 
The effect of the general progress of civiliza- 
tion and of the development of ambition and 
education among the laboring class upon the 
standard of living has already been referred 
to. In addition, however, there are two more 
tangible factors which may serve to better the 
condition of labor. An increase in wages 
based on the principle of increased productive 



186 DETERMINATION OF RAILWAY WAGES 

efficiency represents an advance in excess of 
that needed merely to maintain the standard 
of living. And further, the refusal of arbitra- 
tion boards to permit a decrease in wages 
corresponding to the decrease in living costs 
during long time periods of declining prices 
will also advance the standard and enable 
employees to secure a higher scale of comfort. 
On the assumption that the lowest grade of 
employees in the industry concerned are re- 
ceiving a living wage, the test of the adequacy 
of the wages paid any grade of employment 
is as follows: Have living costs increased 
since the last wage adjustment affecting the 
employees concerned? Have there been any 
increases or decreases in labor, risk, and re- 
sponsibility in this occupation since the last 
advance in wages? Is the industry or busi- 
ness unit in which the men are employed 
enjoying increasing profits as a result of im- 
proved methods of production or of increased 
demand? If these three questions taken to- 
gether can be answered in the affirmative, 
then the wages received are inadequate and 
should be advanced. 

III. Effect upon Wage Advances of Inability 

TO PAY 

It is ordinarily difficult for a board to ob- 
tain any facts upon which a conclusion can be 



PRINCIPLES OF ARBITRATION 187 

reached regarding this question. Just as em- 
ployees in making wage demands usually 
represent their condition as far worse than 
actual investigation demonstrates, so em- 
ployers, desiring high profits and recognizing 
that wages and profits come out of earnings, 
ordinarily claim that an increase in labor 
costs will cut down profits to a point which 
they consider an inadequate return on the 
investment, or in some cases will entirely de- 
stroy the possibility of making any profit at 
all. Statistical exhibits showing for an indi- 
vidual business the actual amount of profit 
are usually misleading and practically use- 
less, for the variations and intricacies of dif- 
ferent methods of accounting enable em- 
ployers to show that the particular business 
is earning a minimum amount. The employ- 
ees, on the other hand, usually present equally 
convincing proof that profits are ample and 
that wage advances can be made without 
injury to the owners or to the public. Arbi- 
trators have no way of discovering which of 
these two statements is correct; nor have they 
the time or the ability to investigate the true 
conditions and arrive at a conclusion based 
on the actual facts. 

Even if arbitrators were able to ascertain 
the actual profits of an industry or individ- 
ual business, when the question arises as to 



188 DETERMINATION OF RAILWAY WAGES 

whether these profits are large enough to 
permit a wage advance, a further difficulty 
appears, for there is no generally accepted 
opinion as to what constitutes a fair rate of 
profit, any more than there is a universal 
opinion as to what constitutes a fair wage. 
Some investigators hold that weight should 
be given to the profitableness or unprofit- 
ableness of a business in determining wage 
advances; others maintain that this position is 
untenable. The whole discussion as to whether 
the inability of the particular business to pay 
should affect wage advances is marked by 
bias, inaccurate reasoning, and a lack of any 
definite theory of fair wages and profits. 

On the basis of the conclusions reached in 
the preceding pages, it must be granted that 
the payment of a living wage to the low- 
est grade of employees, and the maintenance 
of the standard of living of all employees, 
skilled and unskilled, by an increase in wages 
proportionate to the increase in the cost of 
living, must be regardless of the financial 
condition of any industry or unit of it. The 
payment of a living wage and the mainte- 
nance of the standard of living are essential 
from a social point of view; and there is no 
reason why an unskilled laborer should be- 
come an unfit member of society by receiving 
a wage lower than a decent, normal stand- 



PRINCIPLES OF ARBITRATION 189 

ard, or why a skilled laborer should take a 
lower position in the social scale, because the 
business in which he is employed is unfavor- 
ably situated in regard to transportation fa- 
cilities; is failing on account of a fall in de- 
mand for its products; or is in financial straits 
as a result of mismanagement or any other 
similar misfortune. 

The effect of increases based on the living 
wage and on the increased cost of living will 
be, of course, an advance in operating ex- 
penses, and a consequent reduction in the 
amount available for dividends, surplus, etc. 
In some cases these wage advances will be 
offset by the increased efficiency of labor, 
the introduction of improved machinery, 
more efficient management, and a larger 
amount of product; in other cases, however, 
these counter influences may not operate, 
and profits will be reduced or entirely ab- 
sorbed by the wage advances. Two courses 
of action are possible for the latter class of 
establishments — retirement from business 
or an increase in the price of the product. 
The first will affect only a few persons, the 
latter affects all who purchase the particular 
commodities produced. Either of these two 
results, however, it may be held, is of less 
disadvantage to society than the underpay- 
ment of laborers. It has been asserted that if 



190 DETERMINATION OF RAILWAY WAGES 

prices increase as a result of wage advances, 
the laborer is just as badly off as he was be- 
fore the increase, and therefore it is useless 
to advance wages on the basis of the increased 
cost of living. It has been pointed out, how- 
ever, that although the wage-earning class 
numbers about four fifths of the total popu- 
lation, yet it consumes only about two fifths 
of the annual aggregate of products and serv- 
ices, the rest being enjoyed by the employ- 
ing and propertied classes. If the rise in 
wages were reflected in all prices by an iden- 
tical rise, the wage earning class would bear 
but two fifths of the additional price. Even 
this burden would not be borne if the rise in 
prices occurred in those commodities which 
do not constitute items of expenditure in 
wage earners' families. 1 

In the application of the principles of the 
living wage and of increased cost of living, 
then, the inability of the business to pay 
should not be allowed to affect the increase. 
Wage advances based on increased labor, 
risk, and responsibility are likely to total a 
small amount and the effect upon profits will 
be almost negligible. As to the application 
of standardization, precedent in arbitration 
proceedings in the United States has estab- 
lished the principle that the inability of par- 

1 Webb, Industrial Democracy (1902 ed.), p. 781 (note). 



PRINCIPLES OF ARBITRATION 191 

ticular units to pay the standard rate should 
not influence the uniform payment of that 
amount throughout the section or district. 
There appears to be no reason why this prece- 
dent should be regarded as unfair, unless it 
could be shown that the standard was not 
at the proper differential level above the 
compensation of the lowest grade of em- 
ployees. The claim for wage advances based 
on the principle of increased productive effi- 
ciency can be brought forward only where 
the industry concerned is earning increased 
profits from improved methods of produc- 
tion. Inability to pay, therefore, has no 
bearing on the possibility of applying this 
principle, but only upon the part of the in- 
creased profits which is to be granted to the 
employees in the form of wage advances. 

As a general proposition, then, it may be 
stated that the inability of the industry or 
units to pay should not be permitted to 
affect wage advances. It is necessary, how- 
ever, to qualify this statement somewhat 
when this inability arises from general busi- 
ness depression, and not from any chronic 
condition of the industry concerned. Periods 
of business depression are usually brief, and 
since, at such times, the margin of profit 
may be temporarily so narrow that an ad- 
vance in wages will require retirement from 



192 DETERMINATION OF RAILWAY WAGES 

business or an advance in prices, wage in- 
creases should be denied. Demands based 
upon increased productive efficiency and in- 
creased cost of living are not likely to be 
presented during periods of depression, but 
if employees do make such demands they 
should be refused. When a wage advance is 
awarded on the basis of the increased cost 
of living after a period of depression, care 
should be taken to measure the increase in 
living costs, not from the year of lowest price 
depression, but from the year of the last 
wage adjustment. 

One exception should be made to the gen- 
eral statement that no wage advances should 
be granted during years of business depres- 
sion. When demands are made upon the 
living wage principle, arbitration boards 
should award the full amount of wage ad- 
vance necessary to secure the normal stand- 
ard of living regardless of general business 
conditions. The payment of a living wage 
is of the utmost importance and should re- 
ceive first consideration. Employees, how- 
ever, in planning requests for wage advance 
on any of the above principles should en- 
deavor to select the most opportune time 
for presentation, avoiding periods of depres- 
sion and delaying requests, as the conduc- 
tors and trainmen did in 1908. 



PRINCIPLES OF ARBITRATION 193 

Finally, arbitration boards should refuse 
reductions in wages during periods of de- 
pression, because a decrease in wages will 
hinder readjustment and the return of busi- 
ness prosperity by checking the incentive 
of employers to introduce economies in costs 
other than labor, and by decreasing the effi- 
ciency of employees. 

The above principles for the government 
of arbitration awards concerning wages are 
suggested as a substitute for the usual com- 
promise decisions. Arbitration, as it is now 
practiced, is merely mediation conducted 
under the guise of judicial procedure. On 
account of its essentially judicial nature, an 
arbitration award is expected by the em- 
ployers and employees to approach some 
standard of fairness and reasonableness. 
Compromise decisions fail to meet this ex- 
pectation, and the attempt has been made 
in this chapter, to suggest some fair and rea- 
sonable bases of wage advance, in the belief 
that their application will make the boards' 
findings more in accord with the underlying 
principle of arbitration. 



INDEX 



Arbitration boards, attitude 
toward system standardiza- 
tion, 8-12; attitude toward 
district standardization, 26-31; 
attitude toward national stand- 
ardization, 37-39; refuse to 
standardize rates East and 
West, 51-53; uphold principle 
of living wage, 62-67; prob- 
lems confronting, 71-76; posi- 
tion re increased cost of living 
plea, 90-95; re increased pro- 
ductive efficiency, 142-143; 
three problems of, 168. 

Australasia, 72, 170. 

Baltimore and Ohio R.R., 30, 93, 
109. 

"Big Four" Arbitration, 66. 

Brotherhood of Locomotive En- 
gineers, 15, 130. 

Brotherhood of Railroad Train- 
men, 14, 120. 

Brown, W. C, 88. 

Bureau of Railway Economics, 
101. 

Business depression, effect on 
wages, 66-67, 73-76, 126-128, 
191. 

Canadian Department of Labour, 

105. 
Canadian Northern R.R., 58, 63, 

64, 66, 94. 
Canadian Pacific Railway, 28, 

58, 63, 66, 113, 121. 
Carter, W. S., 85. 
Chapin, 69, 70, 83, 99. 



Chicago, Burlington & Quincy 
R.R., 84. 

Chicago Terminal, 161. 

Clark-Morrissey Award, 27, 86, 
88, 93. 

Classification of service, 3, 4. 

Collective bargaining, 12-13; 
purpose of, 14. 

Compensation, danger of uni- 
form, 40-41. 

Concerted movement, in West, 
14-18; purpose of, 43-^4. 

Conference Committee of Gen- 
eral Managers, 15. 

Cost of living, reflected in stand- 
ard rate, 48-49; as basis of 
wage advance, 77-86, 178; 
railways' attitude on, 86-90; 
attitude of boards, 90-95; ef- 
fect of decreasing, 113-118, 
179; effect of, plea on public, 
121-122; underlying principle, 
118-119; principle of, 178. 

Denver and Rio Grande R.R., 
93, 129. 

Devine, E. T., 69. 

Differential wage, 169 ff. ; cause 
of widening of, 171; influences 
that keep, constant, 181-182. 

District standardization, mean- 
ing of, 12; desire for, 12; move- 
ment for, 14; recognized dis- 
tricts, 17 n.; employees' con- 
tentions, 19-23; railways' op- 
position to, 23-26; boards' atti- 
tude toward, 26-31; advan- 
tages to all parties, 46-49. 



196 



INDEX 



Doctrine of vested interests, 80- 
81. 

Eastern Association of General 
Committees, 16. 

Eastern Conductors and Train- 
men, 12, 27, 31, 37, 50, 51, 52, 
86, 89, 136, 142, 146, 162. 

Eastern Engineers, 4, 9, 10, 26, 
27, 30, 31, 33, 37, 87, 91, 108, 
110, 161. 

Eastern Firemen, 12, 20, 27, 31, 
34, 37, 85, 136, 147. 

Economists, agree as to com- 
pensation, 67-70; urge main- 
taining standard of living, 
95-97. 

"Elusive phrase," 135. 

Employees, form of standardiza- 
tion proposed by, 3-4; claims 
for standard rate, 5-6; seek to 
extend standard rate, 13-14; 
benefit by concerted move- 
ment, 18; chief contentions of, 
19-23; claim for national 
standardization, 32-34; inter- 
pretation of living wage, 56-60; 
cost of living as basis of wage 
advance, 77-86; claims re pro- 
ductive efficiency, 132-138; 
relation to increased output, 
146/. 

"Endless chain," 36-37, 51-52. 

Erdman and Newlands Acts, 60, 
77, 93, 129. 

Erie R.R., 30. 

Federal Hour Law, 18. 
Frisco R.R., 15. 
Full Crew Laws, 161. 

Garretson, 52. 

Georgia and Florida Arbitration, 

25, 28, 30, 163. 
Georgia Railway Strike, 85. 



Grand Trunk Pacific R.R., 58, 

63, 66. 
Grand Trunk R.R., 28, 58, 64. 
Greenwich House, 99. 

Industrial Disputes Investiga- 
tion Act, 60, 77, 94. 

Labor, as a determining factor, 
22, 134, 157, 180. 

Lee, Elisha, 87. 

Lee, W. G., 120. 

Legislative Council of New Zea- 
land, 72. 

Living standards, strata of, 55- 
56; defined, 81-82; effect of 
class of society upon, 82, 119- 
120; income chief determinant 
of, 83-86; maintenance of, 
urged by economists, 95-97; 
not stationary, 118-121, 188. 

Living wage, meaning of, 55 ; em- 
ployees' interpretation of. 56- 
60; objection of railways to, 
60-62; boards in favor of, 62- 
66; possibility of determining 
amount of, 69-71; essential, 
188/. 

McCrea, President, 124. 
Massachusetts Commission, 79. 
Massachusetts Commission on 

Cost of Living, 121. 
Minimum of subsistence, 55. 
Missouri, Kan., & Tex. R.R., 15. 
Missouri Pacific R.R., 15, 63, 93. 
Mitchell, W. C, 75. 
More, 69, 70, 83. 
Morrissey, P. H., 110. 

National standardization, em- 
ployees' claim for, 32-34; rail- 
ways' opposition to, 34-37; 
attitude of boards toward, 37- 
39; advantages of, 53. 



INDEX 



197 



Nearing, Scott, 69. 

New Haven R.R., 30. 

New York Central R.R., 27, 30, 

93. 
New York, Chicago & St. Louis 

R.R. (Nickel Plate), 57, 61, 

62, 63, 104. 
Normal standard of living, 55; 

essentials constituting, 68-69. 

Order of Railway Conductors, 14. 

Organization, beneficial to un- 
organized, 165-167. 

Output, relation to traffic and 
capacity, 139-141; result of 
joint^activity, 145 ff. 

Pennsylvania R.R., 30. 

Perham, 104. 

Pittsburgh Terminal R.R., 63. 

Productive efficiency, principle 
of increased, 130, 182-184; 
employees claims re, 132-138; 
meaning of, 137; attitude of 
railways, 138-142; position of 
boards, 142-143; validity of 
principle of, 143-157. 

Railway Post-Office Service, 39. 

Railways, reply to demands for 
standardization, 6-8; benefit 
by concerted movements, 18; 
ability to pay standard rate, 
22, 66, 125, 187 ff.; opposition 
to district standardization, 23- 
26, 45; opposed to national 
standardization, 34-37; ob- 
jection to saving clause, 41- 
42; objection to living wage 
plea, 60-62; inability to pay 
living wage, 66; attitude to- 
ward increased cost of living 
plea, 86-90, 179; claim that 
limit is reached, 123-125; atti- 
tude toward principle of in- 



creased productive efficiency, 

138-142. 
Reading R.R., 30. 
Responsibility, 22, 134, 157, 180. 
Revenues, result of increased 

productive capacity, 131-132; 

principle of participation in, 

133. 
Risk, 22, 134, 157, 180. 
Rubinow, Dr. I. M., 79. 

St. Louis South Western R.R., 15. 

Saving clause, 5; aim of, 7; con- 
demned, 7-8; privileges of, 
abused, 11; attempt to define, 
11; railways' objection to, 41- 
42. 

Select Senate Committee on 
Wages and Prices, 122. 

Senate Committee of 1910, 79. 

Southern R.R., 27, 29, 64, 70, 93, 
103. 

Standard rate, cause of demand 
for, 2; uniform application of, 
3; employees' claims, 5-6; rail- 
ways' definition of, 6-8; form 
of, 10-12; employees seek to 
extend, 13-14; disadvantages 
of lack of, 19-20; ability of 
roads to pay, 22, 181 ff.; dan- 
ger in uniform, 40-41; inevi- 
table, 42-43; cost of living re- 
flected in, 48-49. 

Standardization, meaning of, 1; 
object of, 1; system, 1-12; 
district, 12-31; national, 31- 
39; chief objection to, 40; 
validity of principle of, 39 ff. ; 
effect of inability of roads to 
pay upon, 72-73. 

Statistics, importance of, 97-113. 

Stone, W. S., 130. 132. 

Streightoff, F. H., 69. 

System standardization, mean- 
ing of, 1; form proposed by 



198 



INDEX 



employees, 3-4; railways' atti- 
tude toward, 6-8; attitude of 
boards, 8-12. 

Traffic conditions, 21. 

U.S. Bureau of Labor, 79. 
U.S. Bureau of Labor Statistics, 
69, 78, 101. 

Wabash R.R., 63. 

Wage bargaining, influence of 
form on wages, 43. 

Wages, cost of living as basis of 
advance, 77-86; chief deter- 
minants, 157-167, 180; ade- 
quacy of, 169Jf.; primary, 169; 
secondary, 169; test of ade- 
quacy of, 173-174, 186; prin- 
ciples governing advances in, 
177 ff. ; ultimate basis for ad- 



vance, 184; effect of inability 
to pay on advances in, 186 ff.; 
result of increases in, 189; sta- 
tistics showing increase in, 
106 ff. 

Warne, Dr. F. J., 47. 

Webb, Sidney and Beatrice, 49, 
80. 

West Side Belt R.R., 63. 

Western Advance Rate Case, 124. 

Western Association of General 
Commit tees of the Order of 
Railway Conductors and the 
Brotherhood of Railroad 
Trainmen, 14. 

Western Conductors and Train- 
men, 16, 38. 

Western Engineers and Firemen, 
27, 87, 124, 132, 135, 136, 149. 

Wheeling and Lake Erie Arbi- 
tration, 58, 62, 63. 



(2Tbc ftitaetjrtbe ptrgtf 

CAMBRIDGE . MASSACHUSETTS 
U . S . A 



|)art, §>t!)afftier & iflarjc 
Prt^e (Economic ©gaaps 



THE CAUSE AND EXTENT OF THE RECENT INDUS- 
TRIAL PROGRESS OF GERMANY. By Earl D. Howard. 

THE CAUSES OF THE PANIC OF 1893. By William J. 
Lauck. 

INDUSTRIAL EDUCATION. By Harlow Stafford Person, 
Ph.D. 

F€DERAL REGULATION OF RAILWAY RATES. By Al- 
bert N. Merritt, Ph.D. 

SHIP SUBSIDIES. An Economic Study of the Policy of Sub- 
sidizing Merchant Marines. By Walter T. Dunmore. 

SOCIALISM: A CRITICAL ANALYSIS. By O. D. Skelton. 

INDUSTRIAL ACCIDENTS ANDTHEIR COMPENSATION. 
By Gilbert L. Campbell, B. S. 

THE STANDARD OF LIVING AMONG THE INDUSTRIAL 
PEOPLE OF AMERICA. By Frank H. Streightoff. 

THE NAVIGABLE RHINE. By Edwin J. Clapp. 

HISTORY AND ORGANIZATION OF CRIMINAL STATIS- 
TICS IN THE UNITED STATES. By Louis Newton 
Robinson. 

SOCIAL VALUE. By B. M. Anderson, Jr. 

FREIGHT CLASSIFICATION. By J. F. Strombeck. 

WATERWAYS VERSUS RAILWAYS. By Harold Glenn 
Moulton. 

THE VALUE OF ORGANIZED SPECULATION. By Harri- 
son H. Brace. 

INDUSTRIAL EDUCATION: ITS PROBLEMS, METHODS 
AND DANGERS. By Albert H. Leake. 

THE UNITED STATES INTERNAL TAX HISTORY FROM 
I 86 I TO I 87 I . By Harry Edwin Smith. 

WELFARE AS AN ECONOMIC QUANTITY. By G. P. Wat- 
kins. 

CONCILIATION AND ARBITRATION IN THE COAL IN- 
DUSTRY IN THE UNITED STATES. By Arthur E. Suf- 
fern. 

THE CANADIAN IRON AND STEEL INDUSTRY. By W. J. 
A. Donald. 

THE TIN PLATE INDUSTRY. By D. E. Dunbar. 

THE MEANS AND METHODS OF AGRICULTURAL EDU- 
CATION. By Albert H . Leake. 

THE TAXATION OF LAND VALUE. By Yetta Scheftel. 

RAILROAD VALUATION. By Homer Bews Vanderblue. 

RAILWAY RATES AND THE CANADIAN RAILWAY COM- 
MISSION. By D. A. MacGibbon. 

THE CHICAGO PRODUCE MARKET. By Edwin Griswold 
Nourse. 

THE ARBITRAL DETERMINATION OF RAILWAY WAGES. 
By J. Noble Stockett. 

THE RESULTS OF MUNICIPAL ELECTRIC LIGHTING 
IN MASSACHUSETTS. By Edmond Earle Lincoln. 



